Refinancing/debt consolidation
What is Debt Consolidation and How Does Refinancing Help?
Debt consolidation implied you are combining multiple debts into one loan, making repayments easier to manage. Refinancing your home loan to consolidate debts could also help you save on interest if your mortgage rate is lower than your other debts.
Benefits of Debt Consolidation
- Lower interest costs & time: Potentially save money and time with only 1 account to manage and at a lower rate.
- Fewer fees:Reduce the number of account fees you pay.
- Better credit management: Consistent, timely repayments can improve your credit score over time.
Cons of Refinance
You can combine debts such as credit cards and personal loans into your home loan or a single personal loan to simplify your finances and improve cash flow.
Refinancing to Consolidate Debt
- Refinancing costs: Application, valuation, settlement and mortgage register and exit fees may apply.
- Lengthen loan term: By lowering monthly repayments imply paying more interest overall.
- Higher LVR: Borrowing more against your home may increase your loan-to-value ratio and trigger lenders mortgage insurance (LMI).
- Risk to your home: Your home could be at risk if you cannot meet repayments.
Final Thoughts
Refinancing and debt consolidation can reduce interest costs and simplify repayments, but it’s important to compare fees, loan features, rates and loan terms to ensure it suits your financial goals. We will do cost benefit analysis and empower you with the knowledge to make informed decisions.
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