Applying for a loan while already managing debt can be challenging. Whether you’re on a structured repayment plan or juggling multiple commitments, you might wonder if it’s possible to borrow again. In some cases, the right loan could improve your financial position, especially if it helps you reduce high-interest repayments or streamline your obligations.
Here’s what to think about when getting a loan while on a debt management plan.
1. Assess your current financial position
Start by reviewing your income, fixed expenses and existing debts. If you’re on a debt management plan, understand how much you owe, what your repayment schedule looks like and how long it will take to complete. Take note of the total monthly repayments and compare them against your regular income. Use tools like a personal loan repayment calculator to test how different loan amounts or terms might affect your budget.
2. Know why you need the loan
It’s important to clearly define the purpose of the new loan. Are you trying to consolidate existing debts, cover a necessary expense or handle a short-term gap in your cash flow? If the loan serves a practical purpose and can help you avoid missed payments or higher interest charges elsewhere, it may be worth considering.
3. Review your credit score
Your credit score will influence both your loan eligibility and the interest rate you’re offered. If you’re unsure where your score stands, you can request a free copy of your credit report to review your history. If your credit score is lower due to past missed payments, you might still be eligible with some lenders, but the rate could be higher.
4. Choose a loan type that suits your profile
Not all loans are created equal. You may have the option of a secured or unsecured personal loan. A secured personal loan often comes with a lower interest rate because it requires an asset like a car as collateral. An unsecured loan doesn’t require security, but may have stricter approval criteria.
5. Look for lenders who work with borrowers managing debt
Some lenders specialise in helping borrowers with less-than-perfect credit or those currently managing existing repayments. Avoid any provider that offers unclear terms or too-good-to-be-true approval promises.
Reading real customer feedback and checking how a lender has been rated in independent awards such as the Mozo Experts Choice Awards can give helpful insight into service quality.
6. Be realistic about repayments
When getting a loan while on a debt management plan, it’s crucial to plan repayments that you can manage long-term. A longer term might lower your monthly payments but increase the total interest. A shorter term might save on interest, but it will stretch your budget.
Use a comparison rate guide to compare different loan options more accurately and focus on the full cost of the loan, not just the headline rate.
7. Only borrow what you truly need
It can be tempting to apply for a larger loan, but borrowing more than you need can lead to higher repayments and interest charges. If you’re managing debt, the safest approach is to borrow the smallest amount necessary to achieve your goal.
8. Consider consolidation if it reduces overall cost
Debt consolidation can be a useful strategy if it helps you combine multiple repayments into one, especially if it results in a lower overall interest rate and speeds up repayment.
It’s a good idea to compare your existing repayment schedule with what you’d pay under a new personal loan. You can use a guide on balance transfer vs personal loan to weigh up your options and see what fits best.
9. Be honest and transparent in your application
Lenders need a full picture of your financial situation to assess your application fairly. Hiding debts or overstating your income could result in rejection or complications later on. Provide accurate details and supporting documents as requested.
10. Get professional guidance if needed
If you’re unsure whether applying for a new loan is the right move, speak with a financial counsellor or licensed adviser. In many cases, expert advice can help you avoid costly mistakes or find a smarter way to reach your financial goals.
Explore loan options from NOW Finance
Getting a loan while on a debt management plan isn’t always easy, but it is possible with the right preparation and mindset. Focus on your purpose, assess your budget honestly and choose a lender that supports responsible borrowing.
At NOW Finance, we offer fixed-rate, no-fee personal loans with a transparent online process. You can see how it works, check your eligibility in minutes with no impact on your credit score and use our tools to plan with confidence. Learn why Australians choose us to help manage their financial goals, or consult our FAQs for more information.
Disclaimer: This article contains factual information only and does not constitute financial advice, a recommendation, or an offer of any kind. It has been prepared without considering your personal objectives, financial situation, or needs. Before taking any action, you should assess whether the information provided is appropriate for your circumstances. If this article discusses the acquisition or potential acquisition of a specific credit product, you should obtain and review the relevant disclosure documents before applying. The information is believed to be accurate as at the date of publication; however, changes in circumstances after this date may affect its accuracy.
