Home Loan Customers Getting Smarter at Tackling Debt

Home Loan consumers are taking advantage of lower interest rates and competitive home loan packages offered by lenders to consolidate their debts, says leading mortgage broker Loan Market.

Loan Market Corporate Spokesman Paul Smith said the brokerage had noted a five per cent rise in transactions involving debt consolidation over the past year.

“We are finding that consumers are getting savvier in this lower interest rate environment and taking advantage of packages offered by lenders to tackle their overall debt situation,” Mr Smith said.

“Consolidating your debts into one manageable home loan can be a smart way to not only get your finances in order, potentially at a cheaper rate, but to also reduce the amount of personal finance paperwork you deal with on a monthly basis.

“You might have personal loans, car loans, credit cards and a mortgage. Usually these debts can be consolidated against your mortgage and of course work harder under your lower mortgage rate.

“Many home loan packages will now allow you to pay in your salary direct and generally manipulate your debt to minimise the interest you pay. Before signing up for your mortgage, take a look at your entire financial position and take advantage of any opportunity to consolidate debt and minimise interest.”

Mr Smith said debt consolidation does take a degree of discipline and financial management.

“It can be easy to get into further debt if you don’t stay on top of your financial situation,” he said.

“The biggest mistake can be acquiring more credit cards. Also, by consolidating your debts into one secured home loan, it can take longer to pay off the loan if you don’t make extra repayments.”

Mr Smith said the pros of debt consolidation outweighed the cons if managed properly.

“With all loans secured against one debt, you only have one creditor and therefore fewer fees across the board and less paperwork,” he said.

Mr Smith said consumers looking to consolidate their debts were well advised to consult an expert mortgage broker who can assess their financial situation and explain the range of home loan packages available.