Money doesn’t grow on trees but debts certainly seem to multiply like rabbits. One minute you’re debt-free, the next you’re juggling a mortgage, personal loan and several credit cards. Wouldn’t it be great if you could simplify your credit problem? But where do you start?
Credit and store cards usually have the highest interest rates of all your debts. The rates can be as high as 21% per year and even higher for cash advances. If you’re making only the minimum payment on your outstanding balance each month, you’re giving away a lot of your hard-earned money in unnecessary interest.
The next highest interest rates will be on personal and car loans. At the moment, interest rates on these loans usually range between 9.00% and 16% per year.
Your home loan could save you thousands
Generally, you will be paying the lowest interest rate on your home loan. Currently, variable mortgage rates range between 6.5% and 7.5% per year. Perhaps you should consider consolidating your debts using your lower-rate home loan.
Firstly, by transferring your debt to the lower interest rate on your mortgage, you can reduce the total amount of interest you will pay on those other debts, potentially saving you a lot of money.
Secondly, it allows you to simplify your finances. Rather than making a number of separate monthly repayments on your cards and loans, you will only need to make the one repayment on your home loan.
But take care
Use this strategy wisely. You must continue making the same amount in total repayments each month as you were paying prior to consolidation. If you fall into the trap of consolidating your debts using your home loan and then making only the minimum repayment, you may end up paying much more in interest over the term of the loan.
With professional advice on consolidation, you can avoid these traps and make substantial savings. Contact us to see if you could benefit from consolidating your debts into your home loan.
Personal loan interest rates www.infochoice.com.au
Credit card interest rates http://www.infochoice.com.au
www.canstar.com.au, Interest rate comparison