Consolidating debt, how does it help?

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Thursday, 18 January 2007

If Christmas and the New Year have left you a little out of pocket you're not alone. More and more Australians are funding the holiday season on credit. While it may be an easy solution for a good holiday it can leave you feeling a little stressed in the New Year. If you have spent a little too much over Christmas, consolidating your debts can reduce your overall repayments and fast track your financial recovery.

By bringing all of your smaller debts and credit cards into one loan you can often reduce your overall financial commitments. Credit cards and unsecured loans generally have higher interest rates and shorter loan terms than a mortgage. This means that by consolidating and rolling your credit cards and personal loans into your mortgage you are reducing your overall monthly commitments.

You do have to be careful though. While it is great to reduce your monthly repayments if you roll these debts into your home loan and only pay the minimum monthly repayment you will be paying them off for the next 25 to 30 years. This means that you could pay more in interest. However, this can easily be avoided by paying slightly extra into your loan and paying fortnightly rather than monthly. Remember it's not hard to pay a little extra into your loan when you have already reduced your repayments through consolidating.

Enquire online for a debt consolidation loan...