But you never know when you'll land that work promotion or end of year bonus.So if you find yourself with extra money in your pocket down the track you'll want to make sure the debt consolidation loan you sign up with gives you the ability to pump it straight into paying off your loan.
However, be mindful that merging your different debt into your home loan, could mean you will pay more in interest due to the fact that home loans have a far longer timeframe.
Using the example of a $300,000 home loan with a 5% interest rate, by rolling $20,000 into your mortgage you will end up paying $15,075 in interest on that debt over 25 years.
I couldn't keep up with the payments so they let me only pay the interest now. I couldn't keep up with the payments so they let me only pay the interest now. While one low rate loan could definitely help you kick your debt to the curb, it's important to know how to use the product to your advantage, whilst avoiding the traps that could see your debt stick around for longer than you'd like.
Here are the absolute must DOs and the serious DON'Ts to avoid: DO 1.
* The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan.
The comparison rates displayed are for the amounts and terms quoted, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans, and apply only to these examples.
Start by deciding whether you will sign up with a secured or unsecured loan: Secured loan: As the name suggests, this personal loan option requires you to put up an asset, such as a car or house as security for the loan and in return the lender will reward you with a lower interest rate and fees, as you're considered less risky.
But keep in mind, if you are unable to keep on top of your repayments, the lender has the right to repossess your assets as restitution for any loss they incur.
Flexible repayment frequency: Did you know that if you choose to repay your loan on a fortnightly schedule, rather than monthly you will pay off an extra month at the end of the year? Say you repay 0 a month, over a year you will have paid off ,000 of your loan.
Whereas, if you choose the 26 fortnight option, you will pay off ,500 - bringing you that much closer to blasting your debt for good. Set up automatic repayments And last but definitely not least, you can make sure you never miss a fortnightly or monthly repayment by setting up a direct deposit from your bank account to your lender. Roll your debt into your home loan Yep, home loan interest rates are pretty competitive right now, with many sitting under the 5% mark.
Unsecured loan: Many debt consolidation loans in Australia are unsecured, meaning no security is needed.