How to Manage Debt in Australia: Practical Tips for Repayment

Credit cards, personal loans, and mortgages are common parts of modern life. But changing interest rates, job changes, or unexpected expenses can make debt harder to manage.

The good news? With the right approach, you can take control of your debts and reduce financial stress. Here’s how.

How can you take stock of your debts?

The first step is knowing exactly what you owe. Create a list of all debts including:

• The total amount owed

• The interest rate and how it’s charged

• The monthly repayment amount

• The timeframe to pay it off
  

If you’re missing details, contact your lender to confirm. For better focus, order your debts from smallest to largest.

How do interest rates and charges really work?

Different debts carry different costs.

• Credit cards: Often the highest interest rates, charged daily if you don’t pay in full. Rates for cash advances are usually higher than for purchases.

• Home loans: Lower rates, but still charged on your daily balance. Paying fortnightly instead of monthly can reduce total interest.

• Buy Now, Pay Later: No interest if paid on time, but late fees can be high.

• Personal loans: May have fixed or variable rates, plus penalties for missed payments.
  

Always check for hidden fees and late payment penalties, which can quickly add up.

What is the best way to prioritise debt repayment?

A common approach is the debt snowball method:

1. Focus on repaying your smallest debt first while paying minimums on the rest.

2. Once cleared, roll those repayments into the next smallest debt.

3. Continue until all debts are gone.
   

This builds momentum and reduces the number of active debts quickly.

For debts with fixed interest (like some personal loans), it may make sense to repay them last since paying early doesn’t always save you money.

Should you consolidate your debts?

Debt consolidation means rolling multiple high-interest debts (like credit cards) into one lower-interest loan, such as your mortgage or a personal loan.

It can save money if you are disciplined and avoid taking on new debt. But if you continue spending on credit cards, consolidation could make your debt problem worse. Why is making on-time payments important?

Paying on or before the due date is critical because it affects your credit score.

• A good credit score means you can borrow at lower interest rates in the future.

• A poor credit score means higher rates, or being unable to borrow at all.
  

Setting up direct debits or reminders can help you avoid missed payments.

What should you do if you can’t repay your debts?

If you’re struggling, don’t ignore the problem. Contact your lender directly, many offer hardship assistance such as:

• Reduced repayments

• Lowered or frozen interest for a set period

• Extended loan terms to ease pressure
  

There are also free financial counselling services in Australia that can help you create a plan. Final Thoughts: How to Take Control of Your Debt

Debt doesn’t have to control your life. By listing your debts, understanding interest rates, prioritising repayments, and staying on top of due dates, you can steadily reduce what you owe.

And remember: if repayment feels overwhelming, help is available. Taking action early is the best step toward financial freedom.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.