What to do if your debt is getting out of control

Australians are cutting costs but ignoring debt. These six practical steps can help reduce interest, regain control and avoid repayments spiralling.

Feeling stretched by repayments? You're not alone. Australian households are under the highest cost-of-living pressure in more than a decade, according to the March 2026 NAB Consumer Sentiment Survey.

"Households are clearly under strain, but what's striking is how proactive people are being," says NAB head of behavioural and industry economics Dean Pearson.

"Rather than simply switching spending off, consumers are shopping around, switching providers and making very deliberate decisions to stretch household budgets."

More than one in two Australians switched at least one provider in the past year to save money, with supermarkets topping the list. Households are also shopping around for better deals on insurance, internet services, energy providers and even streaming platforms.

"Consumers are coping, but only by making increasingly tough and deliberate trade-offs," Pearson says.

One area where Australians appear reluctant to act is debt. Just 6% reported refinancing loans to get a better rate, while only 5% considered consolidating high-interest debts.

"The relatively low numbers resorting to these measures may suggest significant barriers such as complexity, perceived hassle, uncertainty or limited eligibility," the report said.

If debt is becoming hard to manage, these practical steps can help you regain control.

1. Itemise your debts

If your repayments are starting to spiral, the first step is to get a clear picture of where you stand.

List all your debts alongside your income, including your salary and any income from savings or investments. For each debt, note the balance, interest rate and minimum monthly repayment.

Once everything is in one place, reassess your budget and identify where changes are possible. That might mean switching to cheaper utility providers, earning a higher rate on your savings or, if necessary, cutting back on non-essential spending.

To decide which debts to tackle first, order them by interest rate from highest to lowest. If two debts have the same rate, prioritise the smaller balance.

2. Create a cash buffer

A small emergency buffer can make a big difference. Arrange for a portion of your income to be transferred to a savings account every payday so you always have cash available to cover minimum repayments if something unexpected comes up.

A high-interest savings account is ideal. If you use a credit card, make sure repayments are set up as automatic deductions from your everyday account.

It also helps to keep track of due dates. Add them to your calendar, whether that's paper or digital, so you know when repayments are coming up and can make sure there's enough money in your account.

3. Switch to a low-rate credit card

If you carry a balance, switching to a low-rate credit card can reduce how much interest you pay. Look for a card with both a low interest rate and low fees. There are many options with $0 annual fees.

Low-rate cards usually come without rewards or perks, but if your income is unstable or you rely on a card to manage cash flow, a lower interest rate matters far more than points or extras.

You may also find more competitive low-rate options outside the big four banks.

4. Consolidate your debts

If you have balances across multiple cards or loans, consolidating your debt may help you pay it down faster.

One option is a balance transfer credit card with a 0% purchase rate for a fixed period. These offers can give you breathing room to reduce your debt without interest adding to the balance.

When comparing cards, look closely at the rate that applies after the promotional period ends, as well as any balance transfer fees and annual fees.

5. Avoid raising your credit limit

An increased credit limit can be tempting, especially when money is tight. But having access to more credit can quickly lead to bigger balances and higher repayments.

Before accepting a limit increase, ask yourself whether you truly need it and whether you could comfortably meet higher repayments if your circumstances changed.

Sometimes the best way to regain control of debt is to reduce temptation, not increase it.

6. Ask for a hardship variation

If you're struggling to keep up with repayments, consider contacting your lender or provider early to ask about a hardship variation. Under Australian consumer credit laws, lenders are required to consider requests for temporary financial relief if you're experiencing hardship such as reduced income, illness or unexpected expenses.

A hardship arrangement could allow you to lower your repayments for a period, press pause on your payments temporarily, or extend your loan term. While interest may still accrue, a short-term variation can prevent missed payments, late fees and damage to your credit record. The key is contact your providers early.

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