Debt consolidation is when you combine your outstanding debts into one loan. Rather than paying off different loans like your credit card, personal loan and car loan at different interest rates - and sometimes with different lenders - you have just one loan, one regular repayment and one interest rate.
One of the biggest potential benefits of consolidating into your home loan is having just one repayment to monitor, which can help make managing your finances easier.
Typically, interest rates on home loans are lower than other lending options, so if you roll all your debt into your home loan you could be paying less interest each month. And if you adjust your home loan repayments to be the same as you what you were paying for all of your individual debts, taking advantage of the lower interest rate could help you pay your mortgage faster. You could even put what you save in interest towards making extra home loan repayments.
However, keep in mind that you might end up paying more interest in the long term – home loans have a longer loan term, which means a greater number of monthly repayments over time.
Use our extra repayments calculator to see how much money and time you could save by making extra home loan repayments, and see some more tips to save money on your mortgage.
Consolidating your debts into one personal loan could potentially save you money by eliminating multiple fees across multiple debts. And if you find a loan with a lower interest rate than the one on your existing debts, you’ll be paying less in monthly interest.
Don’t worry if you have debts with multiple financial providers. You can still consolidate them into one loan. For example, if you have a personal loan with a different provider to your home loan you can consolidate your debts and essentially pay off the personal loan by adding it to your home loan.
The first step is to talk to your lending specialist, either your broker or Home Finance Manager. With their expertise in home loans and lending, they’ll be able to answer your questions and help you go through your options.