Where to go

Debt consolidation is offered by banks, credit unions, financial services co-operative PSIS, building societies, non-bank lenders such as Liberty Finance and GE Money, finance companies, and credit brokers such as Credit Express and Active Finance. (Credit brokers select loans for customers from a range of lenders including finance companies.)

• Credit unions: A not-for-profit attitude and often lower rates and fees make credit unions and other financial co-operatives worth a visit. Credit unions are subject to a regulatory regime.
  
  
• Banks: Banks are reputation lenders - they work under the Code of Banking Practice. Your bank has several consolidation options - personal loans, mortgage top-ups or low-rate credit cards. Make sure your bank works out all the options so you can compare them to get the best deal.
  
  
• Finance companies: Best treated as a last resort. Interest rates and fees can be very high. Get advice before committing yourself from your local CAB, budget advisory service or local community law centre (see "More information" for details).
  
  
• Credit brokers: Make sure you read and understand all forms you're asked to complete. Don't focus solely on the credit contract - you may be committing yourself to a formal relationship with the broker as well.

Case study

Stephen and Janine owed more than $40,000 and were struggling in a cycle of debt with bills, credit cards, default and disconnection notices. It got to the stage where they had no money for food. They were so desperate that in 2006 they turned to Credit Union South for help.

Its lending officer explained the credit union's debt-consolidation options. Stephen and Janine's interest rate would be a lot lower than their existing loans and they would only have one loan payment to make. A tight budget helped them cover food, petrol and other day-to-day costs. A savings plan was also set up for long-term goals.