There are a lot of expenses to worry about when you hit adulthood. Bills to pay, rent, utilities, food, transportation and the like. Other anticipated expenses such as emergencies, special occasions or car breakdowns may tend to hurt your budget and can sometimes lead to debts.
Too many debts is a pain. It can give you sleepless nights, a lot of stress and in some cases, can ruin a relationship.
You can still go back to a sustainable financial life by eliminating debt. Although it can be challenging, with the right perspective and commitment, you can completely be debt free.
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A good place to start when fixing your financial situation is getting your loans consolidated. Loan or debt consolidation is simply paying up all your debts, through a new loan and then repaying that single loan instead of your usual number of loan payments.
If you have several personal loans, credit card debt and a car loan, you are paying for several interests at different interest rates. Consolidating your loan frees you up from having to pay for several accumulated interest rates instead of one. Such a process may give you considerable savings in the process because your interest rate will be constant for a single principal loan amount.
Debt Consolidation Through a Mortgage
If you would want to consolidate your debt all into one account, in this case, your mortgage, a loan refinance on your mortgage can be an option you can take to finally get rid of your other debts.
Consider this if you are drowning in credit card debt and is stressed with its high-interest rates, it would be ideal to consolidate that amount together with your refinance. Doing so will reconstruct your credit card debt, together with your mortgage, into one easy payment with reduced exposure to high-interest rates that banks implement on your credit card balances.
However, if you have several loans to consolidate, say a personal loan, plus a credit card debt and a car loan, it would be ideal to apply for a separate consolidation loan instead of merging it with your mortgage. Why?
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A car loan usually takes 5 years to repay. Thus, 5 years of interest added to your principal. Including this amount to a 30-year mortgage loan term makes you pay for the interest rate of your car loan for 30 years, instead of the usual 5 years. Doing the month, consolidating your car loan debt with your mortgage won’t give you the savings you initially thought you would be getting through debt consolidation.
Talking to a loan specialist can help you identify these areas on your debt consolidation. They can help you identify areas on your loan consolidation where you can actually enjoy savings and make the process of repaying your debt lighter and less stressful on your end.
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Darin Hindmarsh is the founder and CEO of Intellichoice Finance, a broking firm based in Brisbane. He's been providing financial and broking services in the past 18 years. Hindmarsh is also finalist in the 2020 Australian Mortgage Awards - Pepper Money Broker of the Year – Specialist Lending. To jumpstart your home loan application, visit their home loan online application page today.!