What is it? Debt consolidation involves rolling a number of smaller, high-interest loans into one large low-interest loan.
For example, by rolling your car loan, credit card debt, personal bank loan and perhaps even tax debt into your mortgage, you may benefit from the simplicity of a single repayment and lower interest rate that it offers.
Debt consolidation means you effectively pay off these debts by increasing the payments you make on your mortgage and/or extending the period of your home loan.
The only potential disadvantage to debt consolidation is the time it takes to pay off all your debts. A car loan, despite having a high interest rate, may have a term of only five years. When you consolidate it into your mortgage, it suddenly has a term which could be as long as 25 or even 30 years. This means you’re paying interest off the balance of the loan over a much longer period of time.
To make a debt consolidation loan truly effective, you should commit to making additional repayments whenever possible to pay off the entire loan as quickly as you can.
Most loans that have been formally recognised and documented can be consolidated into you home loan.
Other personal debt you may have with family or friends as long as it has been properly recorded.
A quick consultation with a Home Loan Republic broker will soon determine whether debt consolidation into a home loan is appropriate for you at this stage. It may be that you consolidate some of your loans but not all. Whatever your financial situation, we can help you find the best solution.
At Home Loan Republic, we regularly save our clients thousands of dollars by assessing their current home loan situation and taking advantage of better deals. Arrange your own Home Loan Health Check today and reap the benefits.
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