Please note that the below points do not take into account your personal objectives, financial situation or needs and it is important that you consider these matters first before making any financial decision. We strongly recommend that you speak with your financial advisor first or seek clarification from one of our financial planners at Intellichoice to ensure your needs are met.

Budget

Take the time to complete a budget planner. A budget will help you get an idea of where you are spending your money, where you can potentially cut back on spending and how much is left over after you have paid all your regular bills and living expenses. If you find your income is greater than your expenses, you can use the extra money to pay off your debts with the highest interest rate.

Pay off higher-interest loans first

Mortgage loans such as credit cards or personal loans tend to have a higher interest rate than your home loan, so it makes sense to repay these first.

Pay at least the minimum monthly amount. Budget carefully and try to keep money aside for extra payments. Make extra payments on the loan with the highest interest rate first. Once you have paid that off, focus on the next highest.

The higher the amount you pay each month, the less it will cost you in interest payments and the quicker your mortgage loans will be paid off.

Reduce your mortgage

Any extra payments you make on your home loan will reduce the interest you pay. Using spare money to make extra payments can have a big impact in the long run, potentially reducing your mortgage term by years.

If you make extra payments towards the end of your home loan, it is less effective, as the interest component is lower. But any extra payments will still save on interest.

Before you make any extra payments, check that your mortgage lender allows it. Some mortgage lenders may charge you for paying more than you should, or paying out the home loan early. You should also check if your mortgage lender allows you to redraw money from your home loan as this will give you peace of mind that you can get back any extra you have paid in if you need to.

Combine your debts

You could take out a personal loan to repay all your debts or use a debt consolidation loan to repay all your multiple debts. This can make life simpler as you only have a single payment to make each month. And if the mortgage loan has a lower interest rate than your other debts, you save money.

Use your home loan redraw facility

Another option is to redraw funds from your home loan to pay off personal loans or credit card debts. As home loans generally have a lower interest rate, redrawing money to pay off the outstanding debts will result in you paying less interest and having a lower overall payment.

If you can maintain the monthly repayment at the amount you were paying on the individual debts, you will reduce the mortgage loan even quicker. You could also use your redraw facility as a savings account. Instead of keeping money in your bank account or cash trust where the interest it earns is subject to tax, you will reduce the amount of the loan interest you pay while still having access to your money.

To find out more about managing debt or a getting a debt consolidation loan to repay all your existing mortgage loans and credit cards, speak to a financial planner at Intellichoice today on 1300 55 10 45. We can help with managing your debt, budgeting, savings and debt consolidation loans.