Consolidating your debt into your home loan is easier than you think
Dealing with debt can be a stressful time. From managing multiple payments towards different lenders, to paying various interest rates across accounts - the whole thing can be an expensive process.
This is why many people choose to consolidate their debt into their home loans.
Not only can you simplify the process by making one regular payment towards your debt, but you can also save on rates and fees.
This is because instead of paying across various lenders, you will be paying just one.
After incorporating all of your debt into your home loan you can restructure your repayments to get debt-free sooner. For instance, you may wish to raise your payments slightly, or make them more frequent.
Types of debt
Nowadays, it’s pretty easy to get your hands on a credit card or personal loan. This can lead to many people taking on debt easily and quickly.
There are many types of debt that you are able to consolidate into your home loan. In fact, you can consolidate most small types. Some of the most common are personal loans and credit cards.
Another common debt that people tend to consolidate is store cards. These are a type of credit card obtained through stores to make purchases for goods.
The interest rates placed on these types of small debt are usually set quite high, which means that consolidating them into your loan could result in you saving money in the long run.
For example, if you purchased a car with a personal loan then you could face paying interest rates as high as 12% from some banks and lenders.
However, after consolidating this, you could tie it to a much lower and more attractive interest rate.
Things to remember
If you are thinking about consolidating your debt into your home loan, then you may want to speak to a mortgage broker first. This is because there can be costs involved in consolidating your debts, and you will need to see if this option is suitable for your financial situation.
It’s also important to remember that once you consolidate your debt, then it will all become a ‘secured debt’. This means that you will need to have the financial means to stay on top of your regular repayments.
Once your debt has been consolidated, you’ll need to manage your spending appropriately. For instance don’t go seeking further credit cards or loans unless you are sure you can pay it back quickly.
It might be a good idea at this point to create a household budget so that you can manage your future spending.