Personal Loan vs Debt Consolidation vs Debt Review
A personal loan is a single credit agreement; debt consolidation is a new loan taken to pay off multiple smaller debts; and debt review is a statutory process that restructures existing debts without new borrowing. Each suits a different situation: consolidation suits consumers who still qualify for credit, while debt review is designed for those who are over-indebted.
Key Points
- A personal loan is a single new credit agreement.
- Debt consolidation is a new loan that pays off several debts.
- Debt review restructures existing debts without new borrowing.
- The right choice depends on your credit and affordability.
Personal loan
A personal loan is a single, unsecured credit agreement with a set term and interest rate. It is suitable when you need to borrow a specific amount and can afford the repayments. If you are already over-indebted, taking another personal loan to manage existing debt can worsen your position.
Personal loans require affordability assessment and, usually, a reasonable credit profile.
Debt consolidation loan
Debt consolidation involves taking out one larger loan to settle several smaller debts, leaving you with a single monthly payment. It can simplify repayments, but it requires you to qualify for the consolidation loan — which is difficult if your credit is already impaired or your affordability is stretched.
Consolidation also creates a new debt obligation and does not provide the legal protections of debt review.
Debt review
Debt review is a statutory process under the National Credit Act for over-indebted consumers. It restructures your existing credit agreements — without new borrowing — into one affordable monthly payment, with potential interest-rate reductions and legal protection while payments are maintained.
It is designed for consumers who can no longer meet their total monthly debt obligations.
Which is right for you?
If you have a strong credit profile and can qualify for affordable credit, consolidation may help simplify your repayments. If you are over-indebted, missing payments or receiving demand letters, debt review is generally the more appropriate route.
A financial assessment with a registered debt counsellor can help you determine which option fits your circumstances.
Frequently Asked Questions
Worried That Your Debt Has Become Unaffordable?
Debt Guidance can assess your income, essential expenses and debt commitments to determine whether debt review may be appropriate.
Reviewed by Carolina Guevara Harris
Registered Debt Counsellor · NCRDC3152
Last updated: 17 September 2025
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