Consolidating debt good thing
While your monthly repayments will likely be more affordable than paying off your bad debts separately, when you consider the longer terms of most home loans, you’ll likely be making a greater number of payments on your debt, and thus pay a higher amount of total interest, even at the lower rate, than you likely would if you pay off your smaller bad debts separately.Remember: if you’re in financial hardship and struggling with bad debt, you should always carefully consider your available options and do your calculations so you can be confident that you’re making an appropriate financial decision.Of course, credit cards aren’t the only source of bad debt.Just about any loan can turn into a bad debt if it’s left unpaid, as the interest, fees and charges can lead to it growing to the point where you just can’t afford to keep up with your repayments.If your credit card was causing you financial problems, once you’ve consolidated its debts it’s worth thinking seriously about cancelling the card rather than risking building up an all-new debt that could run out of control all over again.Another important consideration when consolidating debt is that you likely won’t end up saving money in the long term.It may sound like a daunting task, but you can pay off your debt with order and dignity!
Making less than the minimum payment due will likely result in the account being reported as past due on your credit report, which will negatively impact your credit scores.
If you’re uncertain, seek independent financial advice, or contact the ASIC debt helpline.
I was able to get a loan to pay off all my credit cards and have one payment per month.
If paying your debt back isn’t realistic or affordable, then another option that may be worth considering is consolidating your debts.
It’s possible to do this by taking out a specialised personal loan, but another reasonable option is to refinance your existing home loan.