By consolidating your debt, you can take some pressure off your monthly finances.
Here is a quick experiment…
Go pick up three balls and try and juggle them. Most people, besides those who ran away to join a circus, will likely drop at least one of them within a few tosses. Now put two of the balls aside and throw the remaining up and down with one or both hands… that is much easier to manage, right?
Well, this is not too dissimilar to the concept of debt consolidation. If you have more than one loan – for example, a credit card, a car loan and/or a personal loan – you can reduce the stress of juggling multiple debts, payment dates and interest rates by rolling them into one easy-to-manage loan.
There are other benefits too
One common debt consolidation method is to take out a new personal loan and use the funds to pay off your other existing debts.
If the interest rate on the new personal loan is lower than the interest rate on your existing debts (for example, a credit card with a 17.99% interest rate) this can help your pay less interest each month and avoid the nasty late payment fees that come with these kinds of cards.
By rolling all your debts into one, you can get a clearer timeline of when you can be debt-free.
Debt consolidation can also make it easier for you to manage your household budget, as you only need to factor in repayments from one debt per month instead of many.
Refinancing your home loan for debt consolidation
Another method used for debt consolidation is rolling it into a refinanced home loan because mortgages offer comparatively low interest rates.
If you are struggling with multiple debts right now, consolidating your debts into your home loan will, in most cases, reduce your overall monthly repayments.
But there is a big word of warning…
Whilst this option can reduce your monthly repayments now, debt consolidation through your mortgage can turn a short-term debt (such as a personal loan) into much longer-term debt.
So, unless you aim to make a lot of extra repayments as soon as possible, you could end up paying significantly more interest than you would have otherwise. One way to address this issue is to create a loan split for the debt consolidation, giving you the ability to pay off all the short-term debts within a few years rather than for example over a 25-year home loan period.
If you would like to explore your debt consolidation or refinancing options, then get in touch with Zippy Financial today, and we can help you look at ways to take off some financial pressure.
Whatever your circumstances, we are here to support you however we can!
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.
One of the biggest mortgage challenges that bubbled up during COVID-19 was the blowout in banks’ turn-around times. While most lenders were previously able to process and approve loans in several days to a couple of weeks, many of their processing times blew out to weeks and weeks – and for some banks, the turnaround time stretched on for months.
That bad news? These challenges are set to continue. With so many banks’ putting an end to pre-approvals, it’s putting extra pressure on other lenders, who can’t keep up with the demand.
Add to this the fact that many banks have support staff based in India, in the grips of a harrowing COVID-19 outbreak, and it’s causing extra delays and dramas across the industry.
As mortgage brokers, we do our best to help our clients navigate these choppy times, but it can be really volatile. We put a home loan deal forward to a bank recently and after submitting, this particular bank stopped taking applications, because they are at capacity in terms of being able to process loans.
Even though we submitted the deal before they announced this temporary cut off, they have refused to assess the deal. This is obviously really frustrating for the borrower, but it also makes us look really unprofessional in front of our client.
We are dealing with an environment that is constantly changing, and if we, who are in the industry are finding it confusing and challenging, I can only imagine how borrowers feel! If you are concerned about your home loan, need advice or you are having trouble working out your next steps, we are on hand to help as much as possible. Contact our team of experienced brokers today on 1300 855 022 for a chat about how we can help you move forward.
Everyone has been talking about mortgages for the last 12 months – ever since COVID-19 arrived, the topic of home loans has been constantly in the air.
From mortgage holidays to interest rates falling to record lows, it’s been a huge year for the finance industry.
It’s also been a huge year for you as a borrower, which is why my question for you is: when was the last time you checked your home loan interest rate?
If you haven’t taken a look at your home loan since 2019, then there’s a really good chance you’re paying too much for your mortgage.
This is because rates have fallen and banks and lenders are being more competitive than ever to try and get your business.
There are some big differences between packaged variable versus basic variable interest rates at the moment – and if you make the switch, you stand to save a lot of money.
What are the best home loan deals on the market today?
The answer to this question quite literally changes daily, but at the time of writing we are able to secure fixed home loans for our clients with an interest rate as low as 1.99%, and variable rates are also very low.
When I talk about packaged variableloans versus basic variable interest rate loans, you might not think there’s much of a difference.
The two loan products do sound very similar, but they’re actually really different.
A basic loan is just that – it’s a loan with no bells and whistles. You can’t save money in an offset account to reduce the amount of interest you pay. You can’t redraw money from your loan, if you make extra payments.
A packaged variable loan comes at a cost, usually around $400. But for that fee, you get:
A discount on your interest rate, which can be worth up to 0.9% on a variable rate loan.
Features like offset, which can save you a lot on interest if you have a decent amount of savings.
Fee-free credit cards – some of our clients take out frequent flyer or rewards cards that have high annual fees. These fees are basically cancelled out by the package fee.
Banks are very competitive right now, with many of them even offering big cashback incentives to get your business.
We have lenders on our books who are offering between $2,000 and $4,000 as a bonus for you, if you refinance your loan with them.
Every bank has a different policy and loan criteria, which is where we can help. If you are thinking of refinancing and want to take advantage of lower interest rates or a great cash back offer, contact us today and we’ll see how we can help you get into a new loan that saves you money.
Comparison Rate calculated on a secured loan amount of $150,000 for a term of 25 years. WARNING: This Comparison Rate is true only for the example given and may not include all fees and charges. Different terms, fees and other loan amounts might result in a different Comparison Rate. Fees and Charges Apply. Terms and Conditions are available on request.