Should I consolidate my debt?
Debt consolidation could be a good choice if you are struggling to manage several debts or if you want to reduce monthly repayments and secure a lower overall interest rate.
To maximise the potential savings of debt consolidation, it's worth aiming to pay off the new debt as soon as possible and avoid taking on additional debt. If you're using a new loan to pay off a credit card, for instance, it's essential to avoid reloading your old card with new purchases. This could quickly see your debt levels spiralling out of control.
Along with savings, debt consolidation can involve potential costs. These will vary depending on how you choose to consolidate debt, but may include:
- Lender fees – you may be asked to pay application fees on the new loan or credit card plus possible exit fees if you are paying out a personal loan or refinancing your home loan.
- Government charges – government duties and taxes may apply if you use your home loan to consolidate debts.
It's important to weigh up any costs against the potential savings to determine if debt consolidation could put you ahead financially.
The best way to know if debt consolidation is the right choice for you is by speaking with an accredited person with expertise across a number of loan products, such as an Aussie Broker.
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