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Consolidate your debts
Step 1: Not all debt is created equal
Between the house, car, credit cards and personal loans, Australians are now living with more debt than ever.
On average, household debt is now equal to nearly 18 months annual salary. The interest rates you’ll pay on that debt range can from as little as 4-5% per year on your mortgage, up to a hefty 20+% per year on your credit cards.
Obviously the lower the interest rate you are paying, the quicker you’ll be able to get on top of your debts.
Step 2: The benefits of debt consolidation
Debt consolidation is the process of taking out a new loan to pay off all your existing debts, so you’re left with just one bill a month.
The aim is to shift this new loan to the lowest interest rate possible.
Do it right and debt consolidation can:
- Save you money as you’ll now be paying off expensive debt (credit cards and hire purchase) at much lower mortgage or personal loan rates.
- Give you the flexibility to pay off your debts slower or faster
- Make life easier as you only have one repayment to make
- Improve your credit rating, providing you make your repayments on time
Step 3: Determining if it is right for you
As sensible as debt consolidation sounds, it’s not for everyone.
If you know you’ll use your now cleaned up credit card to start binging on more debt, you can actually find yourself in a worse situation than before.
You also need to investigate if your current lenders charge a fee if you pay off your loan early.
A personal loans calculator can help you figure out if the benefits outweigh potential fees and expenses.
To help you get a true picture of your finances, work out:
- The amount of money you owe on each debt
- The total amount that you owe
- How much interest you are paying on each debt
- When each debt has to be repaid by
- The additional fees and charges that you're paying for each loan
Ice the plastic
If your credit card is your weakness, freeze it in an ice cream tub of water. You’ll still have a card available for emergencies. However, waiting for it to defrost literally gives you a cooling off period to curb your impulse buys.
Step 4: & get professional advice
This is where the power of & really comes into play. You don’t have to deal with your debt problem all by yourself.
We can help you crunch the numbers to work out the total costs of debt consolidation and suggest the best steps that may help you move forward.
For great rates and terms on secured and unsecured personal loans designed for debt consolidation, chat online now, or drop into your nearest P&N branch.