Inflation and rising interest rates continue to hit Australians hard. Australians have tightened their spending habits, but the cost of living continues to rise. The Australian Bureau of Statistics recently reported that in the financial year of 2021-22, many Australians were forced to dip into their savings, while also taking on more debt. Average household liabilities reached $276,462 in 2021-22, growing by 7.4%1.
If you're looking to manage your debt, then you may want to consider the benefits of debt consolidation. Actively managing your debt now can help provide significant peace of mind, as debt can often snowball if you're not putting plans in place to reduce it. Having the tough conversation about debt now could better set you up to achieve your goals in 2023 and beyond.
What does debt consolidation involve?
If you're looking to improve your current debt situation, then you may have heard about debt consolidation. Consolidating your debt involves taking multiple repayments - such as car loans, credit card bills and other forms of debts - and rolling them into the one repayment. If you've ever felt overwhelmed by your debt situation, then this could be a way of proactively managing and reducing your current debt situation.
Consolidating your debt reduces the need to remember a range of repayment dates while also giving you the chance to potentially change things like repayment schedules and interest rates. It can sometimes involve taking out a consolidation loan, while in other situations it may involve a credit card balance transfer. Every individual situation will differ, so it's worth seeking professional financial advice before you decide on how you're going to consolidate your debt.
How can I benefit from consolidating my debt?
Generally speaking, when you consolidate your debt, you roll your various loan/credit card repayments into the one repayment. In instances where you have many various repayments (which may all have their own separate fees), combining multiple repayments into one means you're less likely to forget to make repayments, and you can instead plan your finances around your repayment schedule.
Consolidating your debt could help you:
- Reduce the risk of missing repayments
- Reduce the amount of interest you're paying overall (depending on what action/s you take when consolidating your debt)
- Reduce the amount you're paying in fees
- Give yourself a more realistic payment schedule
- Give yourself greater peace of mind
The Australian National University's Centre For Social Research and Methods recently looked into the economic wellbeing of Australians, and found that 25.1% of Australians were finding it hard to manage based on their current income2. With rising prices and inflation, it may be the best time to try and reduce your debt situation, even if you can only manage small but regular repayments.
Are there any risks associated with consolidating my debt?
Like with any financial decision, it's important to consider the pros and cons of debt consolidation before making any decision. For example, if you're in a position to pay off your debts now, then it's likely going to be better to do so rather than consolidating your debts. Similarly, if you're finding that you're in a rhythm with your repayments, then disrupting that may prove more detrimental than beneficial to your financial situation.
Depending on your situation and whether you're experiencing debt-related stress, the benefits of debt consolidation may make it a move that's worth strongly considering. Taking out a consolidation personal loan could help you better manage your debt and give you a goal to work towards, rather than feeling overwhelmed by the multiple parties that are asking for repayments at any one time.
Can loans help me manage my debt?
Taking out a consolidation loan could help you manage your debt, especially if the financial institution offers benefits like low or no fees, the ability to set your own repayment schedule and a competitive interest rate. Knowing that you only have to make one repayment (and therefore, only have to track one interest rate) could take a lot of the stress out of managing your debt.
Considering taking out a loan to manage your debt? We offer personal loans that could help you consolidate your debt. Once you've taken out the consolidation loan, you can repay other loans/credit cards/other debts, leaving you with the one repayment to make.
Some of the benefits of taking out a personal loan with us include:
- $0 account keeping fees*
- A low variable interest rate
- Borrow up to $25,000. Minimum amount $5,000
- A loan period of up to 7 years
- Weekly, fortnightly, or monthly repayment options
A debt consolidation loan could give you peace of mind, while also reducing the fees you have to pay on top of your debts. Start off the new year by taking the first step towards taking control of your debt today.
Call our team on 1300 747 747 and enquire about our personal loans to get you started on your journey to debt consolidation.
References
[1] Australian National Accounts: Distribution of Household Income, Consumption and Wealth, 2021-22 financial year (https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-distribution-household-income-consumption-and-wealth/2021-22-financial-year)
[2] Economic and other wellbeing in Australia – October 2022 (https://csrm.cass.anu.edu.au/sites/default/files/docs/2022/11/Tracking_paper_-_October_2022_-_For_web.pdf)
