It’s the perfect time right now to make your way out of debt and to follow through on that popular New Year’s resolution – ‘to get ahead financially!’ However, in spite of the Reserve Bank’s respite on raising interest rates in January, and the sharp fall in the number of Australians taking out home loans, economists predict Australians can still expect at least two more rate rises during 2010.
What does this mean for everyday people who are already experiencing financial struggles or just looking at other financial avenues to help save money?
Debt consolidation is the process of tackling multiple debts by merging all existing debts into a single loan with a lower interest rate. As you only pay one monthly instalment rather than several, the interest rate will be lower as it’s charged on a single debt instead of many; thereby reducing immediate monthly repayments.
Chris Riotto, Managing Director of the Australian Lending Centre, believes debt consolidation is an excellent option offering multiple benefits to those trying to stay afloat or to merely get ahead financially, including saving money by reducing the amount of interest paid; reducing repayment periods; improving personal cash flow by increasing disposable income; and saving time through one single easy-to-manage repayment.
“Being early in the year now is the best time to consolidate. Debt consolidation ultimately gives you a structured plan to overcome your debt problems in a dignified way,” explains Riotto. “While it’s important to aim to get yourself back into a secure and stable financial position to prevent falling into further difficulties, people should explore and evaluate all options before making a thoroughly considered decision.”
Riotto says that there are several types of debt consolidation loans and strategies available. Under this strategy, debts are typically bundled into a mortgage because home loan rates are usually the lowest available, whilst providing the lender with extra security.
Alternatively, many people who consider consolidating their debts aren’t struggling to make their repayments, but simply realise that using their property is a worthwhile idea to save money. Why continue paying exorbitant interest rates on personal loans or credit cards, when you can consolidate your debts at favourable home loan interest rates into your existing mortgage.
This has several advantages in that you can lock in a lower interest rate and enjoy the features of a loan product with more flexibility whilst freeing up the money needed to pay off your debts once and for all. Those without a mortgage may consider consolidating debts into a single personal loan.
Riotto insists that responsibly using your mortgage to pay off other debts can help you regain control of your debts and can help you save money in the long run.
“Bear in mind, consolidation of your debt into your existing mortgage is most effective for larger amounts of money. For smaller amounts of money, consolidation of your loans into a single personal loan is the best solution. In most cases, there are several solutions to help you with your finance.”
Riotto also explains debt agreements are fast becoming an increasingly popular alternative. Although not classified as a debt consolidation loan, a debt agreement is a government initiative that allows Australians struggling with debt to freeze interest, stop the harassment from creditors and debt collectors, prevent legal action and avoid bankruptcy.
For those looking to consolidate, but who may not qualify for standard bank loan products, rest assured there are other options to help you. Riotto says Australians should not lose hope when their local bank turns them down on a debt consolidation loan.
“It’s important to realise that there are other lenders out there like the Australian Lending Centre who understand that not everybody fits the banks’ strict criteria and that often people need a tailored solution to fit their lifestyles. We’ve been in this industry for more than 15 years, serving around 30,000 clients per year. The lending environment is changing daily – circumstances will change, therefore a client’s needs will also need to be adapted.”
According to Riotto, a hike in interest rates of up to 1% can result in Aussie families with a standard variable rate mortgage of $300,000 having to pay over $200 more per month. Locking in a lower interest rate now can mean a big saving in the long run.
“I would recommend to anyone who finds themselves in this position to do your homework -speak to us as well as other lending institutions. We listen to what you have to say, consider the situation realistically, offer professional recommendations that are free of charge and discuss all the possible solutions and outcomes.”
For over 15 years now, the Australian Lending Centre has helped countless Aussies get out of debt. Setting it apart from other companies is its particular strength in helping people with ‘less than perfect’ credit ratings. So if like many Australians, you have a few indiscretions in your past that keep haunting you when you apply for credit, find out what your options are right away from the Australian Lending Centre.
Australian Lending Centre has a range of products designed to help people get out of debt – you can get a free debt assessment with no credit check by spending one minute filling out the ‘express enquiry’ form to the right, or by phoning 1300 138 188 today.