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If you're thinking about refinancing your home loan or even your credit card debts please take note, as what I'm about to tell you could literally your save you many thousands of dollars.
Let me start with your credit cards. Now, if you're like 70% of all credit card holders in this country who don't pay back the amount outstanding each month then you may be better off by consolidating them into a personal loan if you don't have a home loan with some extra equity. By consolidating your credit cards into a personal loan you can take advantage of a lower interest rate (starting from 11.25%pa) and pay it back over a defined period (eg 5 years). Now, this is a whole lot better than the 33 years it would take you to pay off a $10,000 credit card debt with an interest rate of 18.75%pa. If you have equity in your home now may be a great time to bring all your debts into the one debt and one payment. With the current uncertainty around interest rates at the moment and with lenders falling over themselves offering great deals (especially as some fixed rates are lower than the variable!), now is a great time to refinance. If you are going to do this I do suggest you have a chat first to one of our brokers as they'll be able to help you make sense of all the loans out there and then put it all together for you at no charge. One thing you need to remember when you are consolidating your credit cards into your home loan is that you are effectively now converting your short term debt into long term debt. In other words, that takeaway meal you had last week will now take around 30 years to pay off!! Sure your repayments on your home loan may increase slightly as a result of your consolidation but, when you compare your new single home loan payment to the total of the many different payments you will be ahead.
To really take advantage of this, I then recommend that you make extra repayments to your home loan using the extra money you have left over as a result of only having to make only one payment. Remember the one payment will be less than all the other payments combined. The benefits of doing this are enormous. For example, if you paid an extra $100 per month to a $300,000 30 year 8.07%pa loan you'd save about $90,000 in interest plus own your home four and half years earlier. Now, the trick here is to make extra payments right from day one of your new refinanced loan because this is where the power of compound interest works for you instead of the lenders!
One final tip; whatever you do, don't consolidate your cards without shutting all of your old cards. This is a recipe for disaster. Oh, and while you're shutting them down have a look around for a new lower rate card (there's plenty out there - check out www.infochoice.com.au) and set a real low limit. And don't forget to pay it off in full each month.
For help on consolidating your debts just click here and fill out a quick form so that one of our team can be in touch to give you a hand.
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