The non-stop cash rate hikes have left a lot of Australian homeowners with mortgages overwhelmed and burdened by the increasing mortgage payments. If you’re struggling to make ends meet and are considering debt consolidation, you’re not alone.
When you consolidate debt you can simplify your finances and reduce your monthly repayments. But what does debt consolidation mean, and will it help you pay off mortgage faster?
In this post, we’ll explore the ins and outs of debt consolidation and how it can impact your mortgage payments. Keep reading if you’re looking for great debt management ways and to get back on track financially.
TALK WITH PHILWorrisome cash rate hikes and why people are refinancing
More and more Australian homeowners with mortgages are rushing to refinance their home loans because of the nonstop cash rate hikes. With the current cash rate at 4.10%, no wonder people are trying to be smarter and more proactive about their home loans.
Debt consolidation is an option readily available for those who want to refinance their mortgages. And for folks who are already refinancing, consolidating their other debts (e.g., credit cards, car loans, personal loans) into their mortgage is seemingly becoming a popular option.
What is debt consolidation?
Debt consolidation is the process of bringing together all your debt and rolling it into one easy-to-manage loan. This may help you to combine your outstanding financial obligation into one convenient loan, potentially at a lower interest rate than you might be paying now.
How does debt consolidation work?
Here are the benefits of debt consolidation:
- get the opportunity to secure a lower interest rate than what you are currently paying on your individual debts. This can save you money in the long run and help you pay off your debt faster.
- have one payment to make each month, rather than juggling multiple payments to different creditors and risk missing payments.
- combining your debts into one loan with a longer repayment period may enable you to reduce your monthly payments
- pay off high-interest credit cards or other debts that may be hurting your credit score — positively impacting your credit score over time
- ability to choose a repayment period that better fits your budget or opt for a fixed interest rate that won’t fluctuate over time.
How will debt consolidation help you pay mortgage faster?
Debt consolidation can help you pay off mortgage faster by streamlining your debt payments and potentially reducing your overall interest rates.
Consolidating your high-interest debts like credit card balances or personal loans into your mortgage allows you to secure a lower interest rate and reduce the amount of interest you pay over time. This can help you save money on interest and free up more of your income to put towards your mortgage payments.
You may also be able to reduce your monthly repayments and free up more of your monthly budget to put towards your mortgage payments. This can help you pay down your mortgage faster and potentially save you money on interest over the life of your loan.
Is there anything I have to know before consolidating my debts?
While there are potential benefits to consolidating your debts, there are also some potential drawbacks to consider. You may end up:
- with an extended repayment period than what you had with your individual debts
- paying more interest over the life of the loan than you would have with your individual debts, which can increase the total cost of your debt
- being responsible for paying fees and charges associated with consolidating your debts
- incurring new debt while you’re paying off your consolidated loan because you have freed up some of your monthly budget
Is debt consolidation for you? Professional Lending Solutions can help
Of course each individual has their own circumstances, so it’s best to cover all bases and explore other options.
If you need help figuring out if consolidating your debts into your home loan is the right move for you, don’t hesitate to contact myself and my team so we can assist. We also offer guidance to folks who are refinancing personal loans or their mortgages as well.
BOOK AN APPOINTMENT WITH PHIL
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.