Debt Consolidation – A Way to Avoid Hassle and Save Money
Australians have become accustomed to hassle free credit lending because of low interest loans, same-day lending, store cards and easily available credit cards. This easy access to quick money has left many people in financial shambles, with high repayments to multiple lenders, and no money left at the end of the month.
Credit card debt alone presents a scary picture. As of November 2018, 70% of Australians use credit cards, among which some own multiple credit cards. Out of these, 18.5% of credit card users struggle with debt repayment. As a result, Australian citizens owe a national debt of $33 billion through credit card loans. In 2018, on average 34% of credit card limit was used by its users. The purchase rates of credit cards range from 11.99 – 20.99%, depending upon the service provider and the beneficiary’s financial history.
Car loans add on to the debt from credit cards. In Australia, car loans have a varying interest rate from 4.99 – 6.99%. Payment of debt from multiple credit cards and car loans with varying interest rates becomes a hassle and takes a toll on one’s financial situation.
What’s the solution and way out of this situation?
One recommended method is to combine all your existing debts into one main debt and repay the existing debts through this new debt. This is called “debt consolidation”. For better understanding, let’s take a look into the dynamics of debt consolidation.
How Does Debt Consolidation Work?
If you are looking for ways to pay off and manage all your personal loans and mortgage, then debt consolidation is the most suitable avenue to explore. To refinance your mortgage, you will have to apply for a new home loan which amounts to all your debts. Through this loan, you repay your existing loans out. Once all existing and outstanding debts have been paid, you are left with 1 single debt repayment to make every fortnight or month, depending upon the frequency of your payments.
New Loan = Mortgage + Credit Card Debt + Car Loans + Outstanding Payments
What is the Need for Debt Consolidation?
If you have more than one debt to repay, you will be dealing with different interest rates and methods of payment every month. Financial forecasting and management of cashflow becomes complicated in such a scenario. You will also be paying a hefty amount of money for a long time for the debt which has the highest interest rate. By consolidating all your many debts into 1 single debt at a lower interest rate, you will take years off your debts and be able to manage cashflow.
Pros of Debt Consolidation:
The following advantages make debt consolidation a viable option for managing multiple debt and saving money:
- 1. Payment of existing debts at a lower interest rate
- 2. Easy management of personal cashflow
- 3. By having 1 single debt to repay, you will have a clear timeline of when you become debt free
To consolidate your debts and take control of your finances
contact our team on 1300 508 820 or email info@loftuswealth.com.au
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