Debt consolidation, also known as loan consolidation, is when several loans are combined into one, to reduce repayments. Instead of repaying numerous debts with varying interest rates and fees for mortgages, vehicles, credit cards, personal loans, and even phone bills, you’ll only have one monthly repayment to manage, potentially saving you time and money.
Get to know the advantages of refinancing, call a Fast Repay Home Loan broker today.
If you’re having trouble managing multiple debts, including credit cards, debt consolidation can be a suitable option. To determine if debt consolidation can help you save money, you should compare any costs against the possible benefits.
1. Make sure that this is the most suitable option for you
Consolidating your loans should ideally result in improved financial management, so make sure you understand why you want to refinance. If you want to get out of credit card debt quickly, you should reconsider your spending habits.
2. Calculate all costs associated with your current obligations
To determine whether refinancing is worthwhile, you must first understand all of the fees associated with each existing loan. Make a list of your monthly payments, loan interest rates, and other costs related to your existing debts.
3. Determine your borrowing capacity
After you’ve calculated the sum of your loans, double-check that you’ll be able to borrow the amount you require. The first step would be to contact your current home loan provider, as they may be able to assess your loan and present you with a better deal.
4. Evaluate your current loans
If you decide to transfer to a new home loan, make sure you’re getting a better deal — after all, the goal is to save money and pay off debts. Look for a loan that has a low-interest rate and minimal fees. If you require offset accounts or redraw facilities, make sure they’re included in your new loan.
5. Determine the refinancing fees
Your previous loans may incur exit costs if you pay them off early. So there will be fees associated with taking out a new loan. Request a detailed list of expenses from your lender, and determine whether an upfront cost will pay off in the long run.
Call a Fast Repay Home Loan broker to explore the options that may be available to help you secure savings through debt consolidation.
In some instances, debt consolidation is a means to make your debts more manageable by making repayments lower than your current ones, but that’s not always the case.
Before you decide to go for a consolidation loan:
Know that the cost of the new loan will be more expensive overall than your current loans, that the loans you’re paying out won’t be cancelled (so you can avoid getting more debt), and that you’re taking unsecured debt and turning it into secured debt (for example, increasing your home loan to pay out credit card debts).
After considering all of these factors, if any apply, we advise you to seek advice from one of our financial advisers before making this choice.
Refinancing your home loan to consolidate debts is a big decision, and you should get professional assistance to determine whether it’s the best option for your lifestyle and budget, so call us today.
Disclaimer: Information included in this post is of general nature, it has been prepared without taking into account your specific situation. It is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice. You should not make any decision, financial or otherwise, based on any of the information presented here without undertaking independent due diligence and consultation with a professional accountant or financial adviser.