Simple Debt Consolidation Strategies for Australian home owners

Debt Consolidation Strategies

The best place to start your home loan search

for Australian home owners

Debt Consolidation can help borrowers with multiple loans at different interest rates to consolidate all their loans into a single loan. This results in a lower monthly repayment when compared to to the total repayments of the separate loans.

Borrowers often need to combine their home loan, credit card debt, store cards, personal loan and car loan into a single loan in order to reduce monthly repayments. 11% of all home loan applications in Australia are by borrowers looking to consolidate their debts.

If you have sufficient equity in your own property to borrow against it may be possible to reduce your total monthly repayments by up to 50%.

However, you must have a financial strategy in place for debt consolidation to be successful and this is discussed in more detail below.

Std Variable Rate Loan
Basic Variable Rate Loan
Fixed Interest Loan
Split Loan
Home Equity Loan
Debt Consolidation Loan
Low Doc Loan
Non-conforming Loan
Line of Credit
Interest Only Loan
Reverse Mortgage
Construction Loan
Renovation Loan
Home Loan Resources
Mortgage Broker

How Debt Consolidation works

There are no secret debt consolidation strategies. Repayments are reduced in two ways.

Firstly, interest rates on credit cards, personal loans, store cards and vehicle loans are usually higher, and often much higher, than home loan interest rates. By combining these loans into a home loan you get the benefit of the cheaper mortgage rate.

Secondly, by lengthening the term of the new loan which means that the monthly repayments are reduced and become more affordable.

Debt Consolidation is not the perfect solution

It is not enough to restructure your debts in order to improve your financial situation. Without addressing the causes of the problem there is an extremely high risk that debt consolidation will only lead to a worsening financial situation in the longer term.

Spending habits have to change in order for debt consolidation to be successful longer term. The perfect solution is debt consolidation combined with a financial management plan. This is addressed in the strategies below.

Strategies to make Debt Consolidation work for you

1. Stop using your credit card immediately and see if you are eligible for a debt consolidation loan by filling out the online inquiry form at Financial Services Online

2. Once you have been approved for a loan and it has settled then cut up your credit card and close the credit card account. If you don't do this you are almost guaranteed to fail!

3. Set aside sufficient cash in a high interest bearing term or savings account to cover you for emergencies. If you don't have enough cash you may need to borrow extra with your loan.

4. Make increased repayments on your new loan over and above the required repayment amount. Try to pay down the extended part of your loan in less time than you would have done previously. This should be possible because you are paying a lower interest rate.

5. With all future purchases, save up the full amount, pay cash and ask for a discount. If you can't pay cash then don't buy it!

6. Set up a weekly budget and stick to it. Critically examine every purchase you make and only buy what you need, not what you want. If you are overweight then there is considerable scope to even cut your food bill!

7. Buy this book - "Your Mortgage and How to Pay it off in Five Years - by someone who did it in three" by Anita Bell, and make this your Bible.

8. Write down your own personal debt consolidation strategy and evaluate on a monthly basis how you are doing.

9. Bite the bullet and suffer some short term pain. The only way to reduce your debts is to spend less than you earn!

10. Be willing to seek professional advice or counselling if you can't see any hope for your situation.

If you follow these steps you should be able to take control of your debt, instead of your debts controlling you.

Finally, Take a good hard honest look at yourself and evaluate your financial management skills. Is there anything you can change or improve that will help your financial situation? Many people who take out a debt consolidation loan end up worse off than they were before because they do not change their spending habits.

Spending less than you earn and only buying assets that increase in value, rather than liabilities that decrease in value, is the only true way to financial independence and wealth creation.

The best place to start your home loan search

Example Rates and Fees

Variable Rate Home Loan NO FEES (Oct 2012):
  • Monthly fee NIL
  • Annual fee NIL
  • Redraw fee NIL
  • Extra Payment fee NIL
  • Fixing fee NIL
Low Rate 5.60% std. variable
CCR 5.68%*
*Based on $250,000 Loan over 25 years.

The best place to start your home loan search


Thank you for visiting our Debt Consolidation Strategies web-page. We hope the overview has proved useful.

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