how to use debt consolidation to lower your serviceable debts
15 April 2011
Debt consolidation mortgages are for those who find that they are tied down to varying debts; the costs of which are becoming unmanageable. Most people have around three different types of repayments to keep on top of. These include credit card repayments, personal finance loans and home loans. Some manage to constantly juggle these repayments, keeping a close eye on varying changes in interest rates and adjusting their finances accordingly. However, many others, with an income that is not as flexible find that even small changes in interest rates (which in turn affect their variable home loans) throw their repayments off balance and they soon end up owing more than they should to one borrower or another.
Next up - consolidation
Instead of taking out yet another credit card to pay off the last one, or another personal loan to try and pay off five more cards (see how the cycle goes on…) you can consider about the equity you have in your home. A debt consolidation home loan may be the answer to lowering monthly bills and managing costs.
Debt consolidation enables you to consolidate several debts into just one loan at home loan rates, which are generally lower than most other loans on the market
The idea behind debt consolidation is relatively simple, you release some of the equity in your home in the form of a new debt consolidation loan, use this to pay off your other loans and then simply make the regular repayments as part of your debt consolidation mortgage.
Taking multiple high interest rates and turning them into one low rate
In effect, what happens with debt consolidation is that you take out just one loan in order to clear all of your other debts. Loans such as credit cards can often have a 20%+ interest rate. Once these debts are paid off, you are left to make repayments on just one loan with an interest rate lower than all of your others.
Your monthly mortgage repayments will increase to meet the repayments of the debt but this is almost always guaranteed to be lower than the original debt.
What to watch out for?
As with the switching of most loans, there are fees associated with the move to a debt consolidation loan, so you must be careful that the money you save, amasses to more than the fees incurred. If you are in the position of consolidating a few large debts then this will usually be the case but it is a good idea to keep track of fees and other associated costs.
If you’re worried about your current financial status and would like to take out a Bankwest debt consolidation loan then speak to a Bankwest mortgage advisor today.
You can also visit the ASIC website for the following:
Bankwest responsible lending policy
Whilst most of our customers are able to pay their debts comfortably, in the current environment there is increased pressure on some household budgets. Our responsible lending policy means we have robust and sensible lending criteria to ensure we only lend to those customers who have the capacity to repay their debt. Where a customer subsequently experiences financial difficulty we have a range of options to assist them.