Consolidating your debt

February 6, 2018

If you’re feeling the post-Christmas credit pinch, there are some strategies such as debt consolidation that may help ease the financial pain.

When consolidating, choose a loan product with a lower interest rate than your credit card. Unsecured personal loans, for example, traditionally have higher interest rates than car loans. However, there is a finite loan repayment date with a personal loan, which ensures you don’t end up making exorbitant additional interest repayments.

Using a mortgage

Consolidating your credit card debt into a mortgage has some risks. Often people who consolidate credit debts into a home loan, don’t make extra repayment to cover the bigger debt. This error can add many extra repayment years and thousands of dollars in additional interest repayments.

After a consolidation, avoid the temptation to reload credit cards with new. Cut up redundant credit cards and ask your card providers to close the accounts. Maybe consider keeping one card with a small limit for emergencies.

Avoid making minimum repayments

If you’re cash-strapped, lenders will dangle the inducement of making minimum credit card repayments.

Like the warnings on cigarette packaging, lenders must caution customers about the risks of making only minimum repayments. As in the example below, the debt is just $4,500. By making just the minimum payments, you’ll be in a retirement village, or worse, before you pay it off and be out of pocket by more than $20,000 in additional interest charges. Therefore, debt consolidation can be a better option for some consumers.

Leave a Reply

Your email address will not be published.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Suite 10 / 40 Karalta Rd, ERINA NSW 2250

Phone: 1300 306 694

Fax: (02) 4367 8088

Email: info@astuteability.com.au

Web: https://astuteability.com.au

We are in Social Networks

© Copyright 2022 | All Rights Reserved | Astute Ability Finance Group (ABN 56 503 056 856) | Australia Credit Licence 385843
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram