So it is a month since Christmas and that means your first post-Christmas credit card bill has probably landed. Was your spending a little out of control over the Christmas and holiday period? Don’t worry, you are not alone.
It is very easy to find yourself in a position where you have a lot of personal debt from things like credit cards, car loans, store cards and personal loans. These can all start out as being easy to manage but over time we can slowly increase the amounts owing, the card limits and before we know it, we are financially crippled by the repayments.
So what is the answer?
Refinancing
If you have some equity in your home, consolidating all of your debts in to your home loan can offer some significant advantages but you should proceed with caution.
It is really important that you go through all of your debts and write down the following:
- Amount owing
- Interest rate
- Minimum monthly repayment
This will give you a very clear picture of your current debt situation. I know this can be a scary task to undertake but remember – knowledge is power!
Once you understand what you have outstanding, I can help you with your consolidation. If you decide to roll all of your debts in to your home loan, you will see several benefits from this. Firstly, the interest you are paying on your home loan is much lower than personal debt and therefore the amount of interest you will be paying is much less. However, you are paying this over the life of your loan rather than in the short term. Further, you will only have to manage one repayment a month rather than multiple repayments and this will reduce how much you are having to pay.
A word of caution though. If you are serious about getting rid of your personal debt, you must commit to changing your current lifestyle. You should consider getting rid of or reducing the limit on your credit cards. You should also consider using what you would have been making as monthly repayments in the past as a means of making additional repayments on your mortgage so that you get ahead and work on reducing the additional debt that you added to it.