There are a range of solutions available to you that are worth exploring. In this article, we explain why consolidating your debts by refinancing your home may or may not be a good option for you financially, and explain what else you could do to manage your debts. Whatever you decide is best for your financial future, remember we are here to help!
What is debt consolidation?
Debt consolidation involves combining all of your existing debts into one. Usually you take this measure to reduce interest, or simply make your debts easier to manage by spreading your repayments out over a longer period of time.
You may consolidate by taking out a new personal loan to repay your debts, or by refinancing your home loan. This is where you essentially refinance your mortgage so you can get some cash to pay-out your debts. As your mortgage broker, we can access both home and personal loans with competitive rates, so we can help you with either of these options.
How debt consolidation could help you
The key benefit of debt consolidation is that it may help to reduce the amount of interest you pay. The benefit of refinancing your home loan to consolidate debt is that home loan interest rates are generally lower than the interest on other forms of credit, especially unsecured credit like credit cards and personal loans.
Refinancing your home loan means all your debt repayments will be covered by the one mortgage repayment. If you pay extra on your new, refinanced home loan after consolidating your debts, you’ll pay off your debts sooner and save money on interest compared to the interest you might have paid – say on a credit card.
Plus, if you have multiple types of debt with different interest rates and repayment deadlines, trying to manage your cash flow can be as much fun as pulling your own teeth! But consolidating your debt means you’ll only have to remember to make one repayment.
When debt consolidation may not be right for you
For some people, consolidating is a great idea, as it can potentially reduce the fees and interest you pay, but for others, it may not be the right step forward. If your financial circumstances have generally changed for the worse, you may find it difficult to get approval to refinance your home loan from a lender, or get a personal loan at a good rate.
Depending how long it takes to pay off your debt, you could also end up paying more in interest and fees in the long-run compared to if you had just paid it off quicker at the higher rate. Talk to us and we’ll help you crunch the numbers and decide if consolidating your debts is right for you.
Call us now!
Before you decide to consolidate your debt, it’s extremely important to seek advice from professional mortgage brokers like us. We’ll crunch the numbers and let you know if consolidation makes financial sense for you. You can rest assured we’ll be completely transparent about the interest rates, fees and charges you may be up for if you do refinance your home loan, or get a personal loan to consolidate your debt.