Avoiding the debt tsunami - is debt consolidation right for you?
Ever feel like your debts are crashing down on you harder than a set of breakers at Peregian? There are ways you can consolidate those debts to help smooth the ride.
The Debt Reef: Navigating Choppy Financial Waters
Picture this: you're swimming in a coral reef of credit card bills, personal loans and your mortgage repayment. But what if I told you there's a way to calm those turbulent financial seas?
Imagine having a lifeguard for your finances – someone (or something) that rounds up all the debts and pulls them onto the one life raft.
There are a number of ways you could potentially do this.
Your Debt-Busting Strategy
Option 1: Home Loan Top-Up
- Use your equity to pay out other, higher-interest debts
- Roll the other debts into your home loan
Keep in mind this can extend the term and amount on your home loan, so it is important to crunch the numbers to ensure this is the right strategy for you.
Option 2: Debt Consolidation Personal Loan
- Quick and nimble financial maneuvering
- Fixed interest rates (no unexpected wipeouts)
- Faster than paddling through home loan paperwork
Typically this has a higher interest rate than a home loan, so again, crunching the numbers is important.
The pros of consolidating debt
- One monthly payment (less paperwork, more beach time)
- Potentially lower interest
- Simplified money management
Potential risks
- When you consolidate your debt, it is a good idea to:
- Not add new debt, including continuing to accrue credit card debt
- Understand all the underwater currents, such as fees and interest rates
- Ensure you're actually saving money
- Calculate the total loan journey to understand timeframes for paying off debt.
Final considerations
Rolling your debt into one has many benefits, including simplifying repayments and potentially saving in interest. It is important to calculate any fees, impact of extended time on the loan and the interest payable to determine if this is the right strategy for you. We can weigh this up for you and ensure you find the right strategy for your situation.