Over exposing ourselves with debt is popular in Australian culture. Taking out a credit card, increasing the limit, taking out a personal loan or a car loan, and then drowning with repayments can be very common. By consolidating your debts, it means you are paying off these debts and consolidating them into one single debt.
A popular form of debt consolidation is using the equity in your home, and taking out a loan against it to pay out these debts, which subsequently reduces your overall repayments because you are then paying off the loans over the term of a home loan (maximum 30 years) and paying them at home loan rates.
Another alternative is taking out a personal loan to consolidate all your debts into one, which then makes your debts easier to manage by making only one repayment.
The main advantages of consolidating your debt are;
- You could save money because the interest rate and monthly fees on a Home Loan or Personal Loan are usually lower than many credit cards, store cards and other lending schemes.
- It gives you flexibility. You could pay off your debts sooner, or if you need some more flexibility, you could choose a longer term period that minimises your monthly repayment.
- It gives you a set repayment plan to help you get on top of your debt. Many credit cards and store cards only require a small repayment each month, which will take much longer to repay and cost you more interest in the long term.
- You have just one single repayment to worry about, saving you time and hassles and hopefully putting an end to late payment fees.
- If you choose a fixed interest rate loan, you’ll know the exact repayment amount you need to pay each month for the life of the loan.
- If you choose a variable rate loan you’ll be able to make extra repayments without a fee, allowing you to pay your loan off sooner.
- Consolidating your debts could also help improve your credit rating.
Contact Alliance Credit and let us help you improve your financial situation