Stress Less – Lower your Debt, Lower your Stress
Consumer debt is climbing and causing potential distress on household budgets. Mortgage stress was flagged as a major concern for nearly a 3rd of Australian households for December 2017. Pick up any publication in any given week, and you will find numerous articles and opinions on how Australian families are doing it tough with their mortgage and credit debt.
“We were once told that the best way to get out of debt is to not get into debt in the first place. Somewhat sage advice, but not exactly practical in the modern world we live in.”
It can all seem quite grim, and for a lot of people, it is a very real and worrying problem. Thankfully, we like to help find solutions for people. Yes, we love working out the best strategy for our clients; something that best suits their needs, but sometimes things can get out of hand, and spending increases and further debt is taken on. Sometimes it is a necessity, sometimes not. Regardless of how people get themselves into debt, there is always a strategy to get you out of it.
When we meet with clients to discuss their lending needs, we take the time to understand what works for them, what doesn’t work for them and ways that we can minimise their debt stress. When a bank signs a customer on with a Home Loan, it’s common practice that they will present additional options to the consumer. Maybe a credit card, a fee-free personal loan, over-draft – all things that may useful if used for the right reasons, but can directly influence debt stress if not managed the right way.
The key is to understand what that extra debt will look like from all perspectives.
Do you need another enquiry on your credit file?
Is the credit limit manageable within your means?
Are you comfortable with the repayment commitments?
It can sometimes be easy to accept these products as emergency only items, or something that you will cut-up and throw away, or not even use. Statistics and data on credit debt and repayment delinquency would suggest otherwise.
That’s not to say that those additional products aren’t useful, in the right applications. They indeed can be helpful and a very smart strategy. It’s about the context and the real necessity.
For example*: Recently, we worked with a client that had $75K of unsecured debt, across three credit cards and a vehicle loan. This was costing them approx $2685 per month in repayments. Personal circumstances meant that the debt on the cards was not reducing each month. Using the equity in their home, we were able to consolidate this debt into a sperate loan, over a five year period, bringing the monthly repayment down to approx $1381, and also ensuring the debt would be wiped within a five year period. At the same time, we were able to refinance their existing mortgage, saving them a significant amount each month. This alleviated a great deal of family stress as they could now focus on adequately managing their debt, and hopefully paying down their home loan sooner.
It’s always important to assess your debt exposure, especially when considering new loans or credit.
“Take the time to seek the right advice, from people who have your best interest at heart, and underrated what your needs are.”
*The above example has been used for illustrative purposes. It does not in any way reflect your own personal circumstances.