The Christmas/New Year’s holiday season has drawn to a close, and there is no doubt many Australians are regretting overindulging on the ham, bubbly and spending – I know I’m hammed out for another year!

The start of a new year is an excellent time for resolutions, be it for fitness, health or improving your financial position. My experience over the past 12 plus years in the finance space has shown me the start of a new year can be a great time for people with extra credit card, buy-now-pay-later or personal loan debt to consider making good on those resolutions. This can be done by consolidating some of these into a single easy-to-manage repayment.

Benefits of Consolidating Debt

There are several benefits of consolidating your personal debt, including:

• Having a single repayment, as opposed to multiple repayments, may make it easier to manage
• Obtaining a lower interest rate on your debt levels gives you the option of the loan being finalised across a shorter timeframe
• Seeing a single lending facility reduce as opposed to multiple facilities that never seem to reduce.

Options for Consolidating Debt

There are many options that can assist you to consolidate your debt, such as:

• Taking out a personal loan to cover and payout your personal debt, allowing a single streamlined repayment at rates less than most credit cards, or
• Undertaking an equity release loan against your home where you will pay home loan interest rates.

I have found the equity release loan to be a great option, given the record low interest rate environment. Combine this with a home loan rate review and you could borrow additional funds, enabling you to reduce or retain your existing home loan repayments. No longer having to service personal loan repayments means you would be freeing up your cashflow.

Case Study: Equity Release Loan

Recently, I had clients with $70,000 in personal debt facilities, varying between 8%-21% over credit cards and personal overdrafts. This was costing them over $1,100 a month in personal finance repayments – this was only paying back the interest on these facilities, and the balance was not reducing.

Their home loan was at a rate over 2% higher than what was available in the current market. Their home loan repayments were approximately $2,320 per month, which meant their total debt commitment was over $3,400 per month.

With a home loan rate review, coupled with an additional $70,000 in borrowings to cover their personal debts, the home loan repayments reduced to $2,200 per month and the personal debt was consolidated into the mortgage. This saved my clients over $1,220 per month. These extra funds each month now go towards paying their mortgage off in one easy repayment.

Nonetheless, everyone’s circumstances are very different, and I encourage you to seek personalised advice on how you could change your personal debt situation.

How We Can Help

At Lambourne Partners, our teams span Accountants, Business Advisors, Financial Planners and Finance Brokers that can provide holistic advice, budgeting, and a finance solution to assist you. If you would like to talk to someone about your personal debt situation, and potential consolidating and restructuring of your debt, simply contact Jye Smith using the form below or by calling 02 4969 6600 and we can arrange a complimentary initial discussion.