New data shows a majority of Australians are 'worried' about their financial situation.
According to Mortgage Choice's inaugural Financial Confidence Survey, 52.4% of Australians consider themselves to be either 'very worries' or 'concerned' about their finances.
The results weren't altogether suprising as it is common for people to worry about their finances during the festive season.
People don't want to be told to reign in their spending during the festive season and, the reality is, they shouldn't have to. Instead, Australians should use the New Year as a perfect opportunity to re-evaluate their financial situation and make paying off excess debt and debt management a priority.
There are a couple of things Australians can do to better manage their debt and pay off any debt they have accrued painlessly and quickly. They can start this by taking the time to review their financial situation. By knowing what debt they have and interest rate they are being charged, they can put together a plan of attack.
One of the most common and effective ways to manage and pay down an excessive amount of debt is to look at consolidating all of the debts into one area - like the mortgage.
Borrowers can speak to a broker about consolidating all of their debts - including personal loans, credit cards, car loans - into their home loan. This may be able to deliver borrowers with excellent savings, as they may ultimately pay less in interest.
For example, say a borrower owes $20,000 on their credit card with an interest rate of 25%. If they make $500 repayments each month, by the time they have paid off their credit card, they will have paid more than $23,000 in interest.
Now, if the borrower consolidated that $20,000 debt into their 30-year, 4.2% home loan, and continued to make the $500 monthly repayments, they will have paid off the $20,000 debt in half the time and paid just over $1,500 in interest - saving more than $20,000 in interest.
It's important for people to speak with their broker about what is the right decision for their needs. A key downside of consolidation is that a borrower could turn a short term debt like a personal loan into a longer term debt. That means paying interest for longer period, and over time they could end up paying more in interest charges. For this reason, consolidation works best if borrowers are prepared to knuckle down and make extra repayments on the new enlarged home loan.
If you would like to learn more about your home loan and finance options call 03 8602 6777 or email us email@example.com.