What Is Debt Consolidation & When Does It Help?
Debt consolidation means taking one new facility, like a bank loan/financing, to repay/pay several existing debts. From then on, you only have one fixed monthly payment to manage. In Malaysia, the main methods include:
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Personal loan/financing for debt consolidation
A fixed-term loan/financing with predictable repayments/payments. Best if you want structure and a clear end date.
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Credit card balance transfer
This lets you move existing credit card balances to a new card with 0% or low interest/profit for a set time (usually 6–18 months). It’s ideal if you can repay/pay quickly.
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AKPK’s Debt Management Programme (DMP) If you're already behind on payments, this free service helps you reschedule debts and work out a repayment/payment plan.
A Closer Look at Personal Loan/Financing and Balance Transfers
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Personal Loan/Financing
If you prefer a fixed repayment/payment plan with a clear end date, a personal loan/financing is a popular way to consolidate multiple debts into one. It’s especially helpful if you need a longer repayment/financing period or want predictable monthly instalments. RHB’s Personal Financing/-i offers loan/financing amounts of up to RM300,000, tenures of up to seven years, fast approval and disbursement, and much more, depending on your eligibility and needs. Learn more or check your eligibility.
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Balance Transfers
One of the fastest ways to reduce interest on credit card debt is through a balance transfer by moving your outstanding balance to a card with a promotional interest/profit rate. These are most effective if you’re confident you can repay/pay within the low-interest/profit window. RHB’s Smart Move Balance Transfer offers flexible tenures from 6 to 36 months, with interest/profit starting from just 4.88% per annum. Here's a quick look:
Note: Promotion is valid from 1 January 2026 – 31 December 2026
Tip: The shorter the tenure, the less total interest/profit you’ll pay — but be sure your monthly budget can handle the instalment. Apply for RHB’s Smart Move Balance Transfer.
Pros and Cons You Should Know
The upside:
Combining debts means fewer bills to juggle and fewer late fees. A debt consolidation loan/financing often comes with a lower interest/profit rate than credit cards, which means more of your money goes toward clearing the balance, not just paying interest/profit. You can also choose a repayment/payment term that suits your cash flow.
But there are trade-offs:
Stretching the repayment/payment over a longer period can increase your total interest/profit paid. Even with low rates, watch for hidden charges like early settlement or admin fees — they can reduce your savings. Most importantly, if you clear your cards but keep spending, you risk ending up in even more debt.
Example: Paying off RM100,000 through a debt consolidation loan/financing can reduce your monthly payments, but the total cost will vary depending on the loan/financing tenure. Here's a quick breakdown using RHB’s current financing rates:
Choosing the 5-year plan cuts your monthly instalment by nearly RM2400, but costs you an extra RM45,288 in total repayment/payment. Lower monthly payments may ease short-term pressure, but they also extend your debt and your total interest/profit. Always compare the total repayment/payment, not just the instalment, to see the full picture.
How to Consolidate Debt the Smart Way
- List all your debts
Include balances, interest/profit rates, minimum payments, and months remaining.
- Check your Debt Service Ratio (DSR)
This is the portion of your income going toward debt. Most banks look for a DSR of 60-70% or lower before approving a bank loan/financing or personal loan/financing.
- Choose your path:
- Want structure? Go for a personal loan/financing.
- Can repay your credit card debt in under 18 months? Consider a balance transfer.
- Struggling already? Contact AKPK for free support.
- Compare total costs
Look at effective interest/profit rates, tenure, fees, and early settlement terms. Ask: “Will I pay more or less overall than if I keep things as they are?”
- Apply and settle debts
Request the bank to disburse the funds directly to your existing loans or credit cards.
- Set up autopay and stop new card spending
Avoid rebuilding debt. Use cards once your utilisation is back at a healthy level.
- Build better habits
Create a budget, start an emergency fund, and review statements monthly to stay on track.
Alternatives Beyond Consolidation
If your debts are still manageable, DIY strategies like the snowball method (clearing smallest debts first) or avalanche method (clearing highest interest/profit first) may work. Some people consider refinancing their mortgage to pay off unsecured debt, but this comes with risk as you're putting your property on the line. If you're facing serious repayment/payment stress, AKPK’s Debt Management Programme remains your best safety net.
Moving Forward with Confidence
Debt does not have to define you. A well-chosen debt consolidation loan/financing can lower your interest/profit costs and make your financial life simpler. But it’s not a quick fix. Make sure the numbers add up, compare the full cost of repayment/payment, and commit to changing spending habits. That’s how you get back on track and stay there.
Debt consolidation isn’t one-size-fits-all and the right path depends on your situation. If you're considering your next move, take a look at RHB’s personal loan/financing or balance transfer plan options to compare what works best for your situation. If you’re already feeling overwhelmed, reach out to AKPK early. The sooner you act, the more options you’ll have.
