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Take control of your debtMichelle Hudson Many Australians have a car loan, credit card and mortgage and after the wake of the latest interest rate increases prior to Christmas, the New Year is a good time to reassess your financial goals. If you have several debts and don’t seem to making any headway with reducing them you are probably only making the minimum repayments so consolidating your debts might be a solution to your problem. Credit consolidation is where you combine two or more loans such as credit cards and personal loans. There are several things that can be achieved by doing this. You end up with fewer repayments to juggle each month, you can often achieve a lower interest rate and the most important thing is that you will be repaying the debt. In addition you often have the option of taking a fixed rate loan, so way you can also have the certainty of fixed repayments. If you are thinking that credit consolidation might be an option for you, you should be aware that your financial institution will ask to see the last six months statements for the debts that you are consolidating, and they will be looking to see that the repayments were made on time, and in the case of credit cards, that you stayed within the limit (even when the monthly interest and fees were charged). You might be lucky enough to have sufficient equity in your property so you can apply for a loan with your existing financial institution. I recommend that rather than increase your existing home loan debt, ask for a separate loan against your home and take a shorter term as you don’t want to be repaying the dinner that you had at the restaurant last week for the next 30 years! Alternatively if you take a longer term, make sure that you make accelerated repayments. I have a few last pieces of advice. Firstly if you have decided that you wish to apply for a personal loan you should approach your current financial institution as many of the lenders over the last few months have taken the stance of only approving loans for existing customers. Secondly be aware that if you have had a lot of credit enquiries against your name over the last three months or so, your loan might be automatically declined whether you were previously successful in obtaining a loan or not. Lastly declare ALL of your loans, including the one that your friend/relative/partner is paying but it has your name on it as the financial institutions can phone each other to check, and will decline your application if they don’t think that you are 100% truthful.
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Author's Biography |
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Michelle Hudson is a Finance Broker and founder of The Loan Lady. |
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