Debt consolidation is the process of combining a number of different debts into a single loan, in order to help improve your overall finances and better manage your repayments. It may be a good choice for individuals who are struggling managing repayments for several debts or if you want to reduce monthly payments and lock in a lower interest rate. A mortgage broker can help you analyse your current financial situation and how debt consolidation can improve your situation.
There are a number of options available to consolidate all your debt.
Refinancing Home Loan
One option to consider when deciding to consolidate your debts is refinancing your home loans. Interest rates for home loans tend to be lower than other types of debts. Refinancing your home loan to include other debts, could mean a reduction in your overall monthly repayments.
Personal Loan
A personal loan may be useful for individuals who have multiple debts with high interest rates such as credit cards and other loans. Consolidating many debts into one may provide you with a lower interest rate and/or repayments, making it easier for you to manage your finances. With only one repayment to account for each month, it allows you to budget easier and gives you a clear date for when all the debt is able to be paid off by.
Credit Card Balance Transfers
A credit card balance transfer involves transferring the balance of one or more existing credit cards into a new one, usually in favour of a lower interest rate on the full balance. This could make it easier to budget and pay off in the long term. When searching, look for a card that still meets all your financial needs while still having a low rate. It’s a good idea to consider the ‘revert’ rate that will apply to any existing balance once the low rate expires.
When in doubt, speak to a mortgage broker who can help you research the best options for your current debt and what options will suit your current situation.