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With interest rates at record lows now might just be the ideal time to consolidate your debts.
It’s no secret: interest is something no one likes to spend their money on.
While it’s impossible to avoid interest altogether, consolidating your debts into your home loan can be a great way to reduce the amount you spend on interest payments every month. And now is an optimal time to do it.
But what exactly is debt consolidation? Put simply, it’s the rolling of unsecured debt – such as credit cards, personal loans and car loans – into your home loan.
Usually unsecured debt attracts a much higher rate of interest than your home loan, so by consolidating your debts you can dramatically reduce the level of interest you will pay each month. And with interest rates on home loans currently so low, consolidating now may result in substantial savings.
Not only will lower interest repayments take the pressure off your monthly commitments, they can also save you dramatically in the long-run.
But saving money isn’t the only advantage of consolidating. By rolling all of your debt into one, your debt commitments will also be much more manageable and easier to keep track of.
For debt consolidation to truly help you get ahead on your debt you’ll need to think smart and spend sensibly.
Repackaging your short-term high interest debt is only half the story – you need to make sure that you don’t run up more dollars on your credit or store cards once the balance is back to zero.
Remember, the debt you’ve transferred to your home loan still needs to be repaid and still attracts interest, albeit at a likely lower rate. Focus on the simple objective of saving more than you spend and aim to drive down your debt as quickly as possible.
Debt refers to the amount of money borrowed from a creditor with the intention to pay back at a specified date.