Consolidate your high interest personal loan or credit card debt into a low interest “home” loan.

Does it make sense to consolidate debt?

If you’ve got personal debt such as a car loan, personal loan, or credit cards and you’re finding it hard to keep up, it can help with cash-flow to consolidate into a low interest home loan*.

The good thing about consolidating your loans is that you get a chance to lower your monthly payments and save interest. You can structure the loan so that your monthly payments are affordable by spreading them over a longer term so it’s easier to keep up. You can opt to “split” the new borrowings so that it’s not lumped on top of your 30-year mortgage, effectively then you will have 2 loans secured to you home. 1. the original home loan and 2. the new “consolidation” loan. By doing it this way, you will be able to select the term (possibly 5-10 years, instead of 30) and you can focus on paying your “consolidation” loan back as quickly as you can.

The other option is to increase your original home loan to cover the personal debt in its entirety. At MTM, we would only recommend this if absolutely necessary. In doing this, your initial repayments will be less, however if you spread your personal debt over a 30 year term you will end up paying much more interest in the long term and could add years to your mortgage. We think the best option is to keep the “consolidation” loan separate from your original mortgage. That said, this would be the perfect question to ask you financial adviser. If you don’t have one, talk to us ~ we know (and use personally) a range of reputable financial advisers and can introduce you for a no-obligation chat about your personal circumstances.

*To consolidate debt, you must have an appropriate level of equity available in your property, and must also be able to prove serviceability to the new lender. Speak to MTM to see if you have sufficient equity and serviceability to make it happen.

What are the disadvantages to consolidating debt?

Even though consolidating all of your existing credit commitments into a single monthly repayment might sound like a good idea, you must be aware of the potential disadvantages:

You may want to keep your existing loans, even if the payments are higher. Remember that in some cases you may actually pay more in interest over time with your new debt consolidation loan.

Steps To Consolidate Your Debt

Step 1 – Gather Your Debt Details

Before you consolidate, you need to know the following for each credit type:

Step 2 – Explore Your Options

Now that you know how much debt you’re facing, it’s time to look at your options for consolidating your debt.

Step 3 – Apply For Debt Consolidation

Contact MTM to see if you are eligible to apply for a consolidation loan. Your application processing may take 1-2 months so make sure you budget sufficient time.

Step 4 – Stick To Your Commitment

Get out of debt by changing your habits. You need to commit to your planned solution and stick to it. You should keep up with your payments so you will be able to pay off your loan. The trick is to pay as much as you can afford each month so you will get out of debt sooner.