I am considering consolidating some of my loans into a debt consolidation loan. Which of the lenders should I approach first?
Sunday, 29 March 2026
Senior business reporter Rob Stock answers your money questions. Got a question for Sunday magazine? Email it to sundaymagazine@stuff.co.nz
QUESTION: I am considering consolidating some of my loans into a debt consolidation loan. Which of the lenders should I approach first?
ANSWER: Shopping around for a debt consolidation is, according to all the advertising “easy”.
I beg to disagree, on a number of fronts.
A debt consolidation loan is a loan people take out to pay off their other debts. The theory goes that a single loan is easier to manage than multiple loans.
But, before you start your search- and I do have thoughts on what you should do- I have a fairly blunt message you need to take to heart: If you are seeking a debt consolidation loan, you have a disordered money life, and it is time to seek some help. In life, the aim is to be a collector of interest, not a payer of it. Debt consolidation loans are expensive. Relatively mainstream lenders charge up to 29.99%! The shareholders of finance companies do very well indeed. Your interest is converted into dividends to shareholders, who I guarantee do not have debt consolidation loans themselves.
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So, before you start your search, I suggest you make an appointment with a budget mentor, that army of under-paid money heroes grossly neglected by Government, and which should be properly funded by a small levy on lenders.
Property owners fund the fire service on which they depend through levies on their insurance. Lenders should do the same to fund the budgeters who help put out the financial fires in people’s lives in part caused by their products.
A budget mentor will help you do the thing you really need to do: Get to a state of financial affairs where you never need to inquire about a debt consolidation loan again.
It won’t be a once-and-done. They mostly work with people over months.
Once you have consulted a mentor, you will be in a better position to make sensible choices, and may decide a debt consolidation loan is not in your interest.
Some mentors tell me they have never seen a debt consolidation loan that improved things for a borrower.
People who take debt consolidation loans without getting budget mentor help, may end up locking themselves into debt for longer. That’s one of the tricks of debt consolidation loans: long payback periods.
Loans that hang around for longer are an interest bonanza for lenders.
Debt consolidation loans inevitably result in new loan fees.
And debt consolidation loans have a habit of morphing into temptation-forever, open-ended debt facilities.
So, now to shopping around.
Start by researching two lending groups.
The first is the special, but small “for good” lenders who are not set up to maximize dividends for shareholders. These are the very special Money Sweetspot, credit unions, Good Shepherd NZ, and Ngā Tāngata Microfinance.
The second is your bank. While I do not unequivocally love banks, I trust them more than the lower-tier lenders who will appear at the top of your Google searches, because they pay Google to put them there as “sponsored results”.
Take your time in your search, read everything, and centre everything on a plan to get to a place where high-interest consumer debt is no longer a part of your life.
- Sunday Magazine