Resolving to save in the New Year
Consolidating debt could save a bundle
It’s the New Year, a time when resolutions are top of mind – and managing debt is often on the top of people’s lists, particularly after a splurge at Christmas and during the sale season.
Having a number of debts to worry about each month can be a burden and make budgeting difficult. So if you do have debt that you want to manage better, then you may be able to consolidate your debts into your home loan, leaving you with one easy to manage repayment each month.
Consolidation of debt works where a borrower has a range of high-interest debts, such as credit cards and store cards, personal loans or even car loans, and wants to lump them together into one tidy repayment.
The idea is to consolidate all the debts into one loan with a lower interest rate to maximise the savings – and the lowest rate tends to come with your mortgage.
There are numerous benefits of consolidation:
- Interest rates: The interest rates charged on credit cards, store cards and personal loans are usually significantly higher than home loan interest rates. The savings on interest alone can be huge!
- Save on fees and charges: Most credit cards and personal loans incur fees and charges. Consolidating under one loan will save you paying multiple fees and charges
- One repayment: Consolidating saves you the hassle of having to pay multiple bills or manage multiple direct debit repayments. Consolidate your debt into one easy to manage repayment
- Track payments: As there’s only one debt to manage, it’s easier to remember due dates and keep a track of payments
“If people are struggling with post-Christmas debt, then they could possibly roll credit card and personal loan debts into their home loan and help reduce their monthly finance repayments, save money on fees and charges and be able to take control of their debt,” says Homeloans general manager sales, Greg Mitchell.
“If you do consolidate, the key is to pay off the extra debt as soon as possible to ensure it doesn’t accrue a lot of interest over the life of the mortgage. Plus make sure you keep up your mortgage repayments.”
See the table below for an example of how debt consolidation can work and the potential savings!
| Type of loan
| Amount outstanding
| Interest rate
| Monthly repayment
|
| Home loan
| $210,000 | 7.50%pa
| $1,468
|
| Car loan / Lease
| $24,000
| 9.00%pa
| $498
|
| Credit card 1
| $15,000
| 17.00%pa
| $373
|
| Credit card 2
| $6,000
| 15.00%pa
| $143
|
| Personal loan
| $18,000
| 12.00%pa
| $474
|
| $273,000 |
| $2,956 |
Consolidated loans
| Amount outstanding
| Interest rate
| Monthly repayment
|
Home loan
| $273,000
| 7.50%pa
| $1,908
|
Savings per month
| $1,048
|
If you would like to speak to Homeloans consultant about your Debt Consolidation options please provide your details below.
To find out how debt consolidation could work for you, contact Homeloans today.
The loan products, interest rates and monthly repayment figures contained in the aforementioned debt consolidation examples are used only for demonstration purposes and are not indicative of actual market products or interest rates. Borrowers should consider that whilst consolidating existing consumer loans into a home loan may reduce the combined monthly repayments of current consumer loans, the overall interest cost of the existing consumer loans may increase depending on the overall term of the consolidated loan compared with the current individual loan terms and interest rates applicable to any consumer loans being consolidated. Homeloans recommends that borrowers seek independent financial advice before proceeding with any action to consolidate their loans.