Take control of your finances with debt consolidation.
If you’re juggling multiple debts, one way to simplify your finances is to bring all your loans together. This is what’s known as debt consolidation. Not only could it make managing your finances easier, if you structure your repayments in the right way, it could also save you some money and even help you pay your mortgage faster.
What’s debt consolidation and what are the benefits?
Debt consolidation is when you combine your outstanding debts into one loan, rather than paying off different loans separately like your credit card, personal loan and car loan at different interest rates – and sometimes with different lenders.
Benefits.
- You can just have one loan – meaning just one regular repayment
- You’ll only have one interest rate
- You won’t have to worry about different fees for different loans
- If you roll all your debt into your home loan, you could pay less interest each month (as home loans typically have a lower interest rate)
- If you adjust your loan repayments to be the same as what you were paying for all your individual debts, you could pay off your mortgage faster.
Consolidate into your home loan.
One of the biggest potential benefits of consolidating into your home loan is having just one repayment to monitor in addition to saving on interest, which can help make managing your finances easier. You could even put what you save on 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 amount of repayments over time.
What else to consider.
- If you consolidate into your home loan, your other debts will be added on to the home loan, so be aware that your home loan balance will increase
- Rolling other debts into your home loan will likely affect your loan to value ratio (LVR). This could end up changing your interest rate
- You should make sure that your debt consolidation doesn’t increase you above an 80% LVR, otherwise you will need to pay Lenders Mortgage Insurance (LMI)
- If you’ve already started paying your mortgage and you then consolidate your personal debt into your mortgage, any equity you may have gained in your property will decrease
- Every situation is different, so make sure you explore what’s best for you personally.
Common questions.
You can consolidate your credit card, personal loan, car loan and home loan into the same loan.
If you have multiple credit cards, including one with another bank, you can transfer the balance into your existing credit card with us – it’s called a balance transfer. This is another way to help simplify your finances and repayments.