Welcome to our Debt Consolidation loan, information page: This page is designed to assist you in understanding the basics of this type of loan, and to give you an understanding of some of the features and downsides.
About Our services:
- Our brokers are experts in obtaining home loan approvals and specifically trained in loan structuring and credit policy, ensuring the best possible outcome for your needs.
- We provide an Australia wide service, at no cost to you.The lenders pay us a commission for the introduction of your business.
- Our website is designed to help borrowers understand the differences between loan types and the importance of having a mortgage broker to assist you in finding the right lender.
About Debt Consolidation Home Loans
What is a Debt Consolidation Loan?
One of our most popular loans. We have assisted our clients with hundreds of debt consolidation loans over the past 16 years.
Debt Consolidation Loans make a lot of sense once you crunch the numbers. A mortgage interest rate is normally much cheaper than a personal loan rate or credit card rates and combining these debts can save you quite a lot of money.Once you look at the difference in repayments across several debts, and compare them to having one home loan repayment, you will understand the benefits.
But, before you hit the apply button, please read on to understand the pros and cons about this type of loan. We can help you to find a balance that is tailored to your needs.
Should You Choose a Debt Consolidation Loan?
A Debt Consolidation Loan has been a great option for a lot of Australians. These loans allow our clients to smooth out their lifestyle and also create an opportunity for them to manage their finances better.
Things to consider:
When you type the words “Debt Consolidation Loan” into Google, you are going to see a lot of lenders telling you about how great this loan is and that your payments will be reduced substantially and that you will save interest and life will be better, blah blah blah. Well, maybe they are right – maybe they are wrong. Let’s see.
We point out to every client that when you roll your debts into your home loan, you are effectively taking that debt out over a 25 or 30 year period in most cases.
Let’s look at an example: you have a $30,000 car loan that’s costing you $500 a month for a five year term.
After you consolidate the car loan into your home loan and the payments are now costing you $125 a month in interest. As great as that seems, you need to understand that you are now paying your car off over 30 years!
As we all know, our cars are not going to last 30 years before we need a new one.
We give our clients a plan to run with so that this does not happen. This is not just relating to car loans, it relates to any loans or credit cards that are consolidated into a debt consolidation loan.
- These loans are more about which lender is going to help you the most, what loan you will be offered and what features are available in that loan to maximize savings. Not all loans are equal and therefore there will be certain advantages and disadvantages to each lender.
- Not every lender will allow you to consolidate all of your debts into your home loan. Some may allow three smaller debts as a maximum, some also have bigger restrictions that will not allow you to combine your debts into your home loan at all.
As you can see, there is a lot to consider when looking at a Debt Consolidation Loan. Your broker will be able to discuss your individual circumstances with you in order to assess your needs and then provide the appropriate recommendations.
What benefits are there for you in a Debt Consolidation Loan?
There are several benefits that you should consider in a Debt Consolidation Loan. Remembering that this loan should only be applied for if it is going to improve your situation, please take care to read the next two sections carefully.
Benefits to consider:
- If you are struggling with repayments due to having multiple debts, a Debt Consolidation Loan will allow you to minimize your repayments.
Note: It is important that you speak with your mortgage broker so that they can assist you in working out a more beneficial repayment structure.
- If done properly, you should be able to save thousands of dollars in interest due to the lower interest rates that are now applicable to your overall debt. Please don’t underestimate the savings that this loan can give you when it is established correctly.
- Another benefit is having only one repayment to make, rather than multiple repayments to multiple debts. This obviously simplifies your loan repayments and also means that you don’t have to keep track of multiple repayment amounts and the times that those amounts need to be paid.
- Obviously the bank will give you a minimum payment to make, but it is not beneficial if you only pay the minimum payments. Your mortgage broker will assist you to find the right payment that you should make in order to balance out the debts that you have consolidated into your home loan.This way, you will not be paying off your short-term debts over the life of your home loan, which will save you many thousands of dollars.
What do you need to be careful of in a Debt Consolidation Loan?
There are only a few downsides to Debt Consolidation Loans. In our experience most problems with debt consolidation loans are created with the client applies for the wrong loan for what they are trying to achieve. The policy behind some of the loans is quite restrictive and benefits that you may have had elsewhere are just not available in every loan.
Things to be careful of:
- You need to be careful that you understand the difference between the lenders minimum repayment and the minimum repayment that you should make.
- Some lenders will not allow certain features on a Debt Consolidation Loan. Different lenders have different rules regarding the clients who are borrowing in order to consolidate debt.
Even though the clients are going to be in a better position in most cases after the debt consolidation, the lender sees the loan as a higher risk because there were several debts associated with the client. This means that some of them will place restrictions on your loan features. A common condition is where you will need to supply a written request to the lender for redraw and that request will need to be approved. You will also need to pay a fee for the redraw.
- Another thing to consider is that your home loan is now carrying this extra debt. We see it like this. Your debt is your debt, no matter where it is. It is just the geography of where the debt is. Putting the debt onto your home is not a problem as long as you understand what you need to do to make the facility work properly.
How can I apply?
These are your simple steps to apply for a loan.
- Contact us on the numbers above to speak to a mortgage broker, or complete our online enquiry form.
- You will speak with a broker who will take into account your needsby discussing not only your requirements, but also any concerns you have, and offer you some possible strategies and ideas that you may not have thought about.
- Once we know what you require, we will draft and email you a proposal– this will usually consist of a few options that are easy to understand.
- Once you have had a chance to look at what options are available, you can contact your broker or the broker will call you, to discuss the proposal.
- You can then decide if you wish to proceed or you may just want to discuss more options.
What are my other options?
There are many options available:
- Whether you are after a variable interest rate, a fixed interest rate, interest only loan, equity loan or any of the other loans available, it is important that you find out what is available to you before applying for a loan.
- The loans listed below are available for most lending purposes. Whether you are refinancing your home loan to a lower rate, or a property investor looking to buy that second or third property, we will have some ideas for you to consider.
- Even if you are a first home buyer purchasing a new home or renovating your existing home, there are some great deals available from the banks and lenders that we are accredited with.
- Please click on a link below to learn more about other loans that are available to you.