Refinancing for debt consolidation
- Yuan Gao
- Feb 28, 2024
- 2 min read
Streamline your existing debts by refinancing
Debt consolidation is the process of folding or consolidating a number of different debts into a single loan to help improve your overall finances and better manage your repayments
Should I consolidate my debt?
Debt consolidation could be a good choice if you are struggling to manage several debts including credit cards. It may also be the right option for you if you want to reduce monthly repayments and lock in a lower interest rate. However, along with savings, debt consolidation can involve potential costs. Some such costs include penalties for paying your loan off early or application and legal fees. These could vary depending on how you choose to consolidate debt and the loans you’re consolidating.
It's important to weigh up any costs against the potential savings to figure out if debt consolidation could put you ahead financially.
How do I consolidate my debt?
A number of options may be available to help you secure savings through debt consolidation.
Refinancing your home loan to consolidate debt
An option when looking to consolidate debts is to refinance your home loan. The interest rate on a home loan is likely to be lower than the rate you'll pay on other types of debt. Using your mortgage home loan for debt consolidation could mean a reduction in your overall monthly repayments. However, it could also turn a short- term debt like a personal loan into a much longer-term debt (i.e. your home loan). It’s always a good idea to crunch the numbers to know if consolidating debts into your home loan could save you money in the long run.
Personal loan
A personal loan may be useful for consolidating high interest debts like credit card balances and other personal loans into one single loan. Along with the potential to lower the interest rate and repayments you're paying, the fixed monthly repayments of a personal loan may make repayments easier to budget for. And the set loan term also gives you a clear date for the debt to be paid off.
Credit card balance transfers
A good balance transfer deal could make it easier to pay off a credit card balance. This is if the interest rate you'll pay for the balance transfer period is lower than what you're currently paying. Look for a card that matches your ability to pay off the balance transferred while the rate is still low. It’s a good idea to consider the 'revert' rate that will apply to any balance remaining once the low rate period expires. You’ll also need to consider the rate charged for new purchases.
Help with consolidating debt
There is an extensive choice of loan options or balance transfer deals that could help you save money. However, it’s important that you take the time to choose the method of consolidating debt that is right for your budget. Where possible, it makes sense to seek the help of an expert, like an FND Broker. They can make it easy to cut through the clutter to find the right outcome for you.
FND Brokers have extensive experience with debt consolidation, and can look into your circumstances to guide you through the process. Plus, an appointment with an FND Broker is free.
