At this time of the year, it is easy to spend money and rack up debt.
But while it is easy to spend money, many of us find it very tough to pay our debt off once we have built it up.
If you find yourself in a similar situation, don't despair – there are a few easy things you can do to help reduce your debt.
In this article, we look at the 6 simple tips you can implement to help you reduce your debt.
1. Build a budget
Before you can effectively pay down your debts, it is important for you to know what debts you have. Collect all the information about your debts and then build a budget that stops you from spending more money than you have.
If you have quite a bit of credit card debt or a few personal loans with high interest rates, you can consolidate this debt into your home loan. Consolidating your existing debt into your home loan can help you to reduce the interest you pay on each of your debts – as the interest rate on a home loan is generally a lot lower than the interest charged on credit cards.
3. Transfer balances
If you have a sound credit history but a few credit cards with high interest rates, you may be able to negotiate with your financial institution to have your credit card debt transferred onto another card with a lower interest rate. Sometimes you can even get a low introductory interest rate and use this period to make extra payments on your card.
4. Check your home loan's health
Australia's lenders are keen to attract new business at the moment, as such, they are offering some significant incentives to new customers – including free usage of any ATM in Australia, and even cash-back incentives to those who open a new account. You may also find switching lenders can help you to save money faster – money that can then be used to pay off your debts. What have you got to lose? Research your options and see if there is a better financial institution out there for you.
5. Use redraws wisely
If you have a redraw facility connected to your home loan, you may be able to draw out any extra payments you have tipped into your home loan and use this money to pay off your other existing debts. It is always a good idea to pay off your debts with the highest interest rates first. But while a redraw facility can be a handy feature, it is a good idea to use it sparingly. Dipping into your loan too often will reduce the interest savings made by the extra repayments, and you may also be charged a fee for each redraw.
6. Compare to find a better deal
You may be paying more than is necessary on your home loan, insurances, utility bills, etc. Comparing your options via your mortgage broker can help you find the best deal suited to your needs and may see you save money.