Debt Consolidation in Australia
With interest rates increasing a lot of clients start thinking about combining all of their personal loans, credit cards, car loans and other debt into a low rate loan secured against their home.
Refinancing loans in Australia for cars boats trucks and mortgage loans.
At first glance this seems a great idea as home loan rates average @ 7%.
A lot of credit cards have annual percentage rates that are in the mid to high 20% range.
It is also attractive to have only one payment to pay.
Using your property may not be the best option.
Most short term loans cost more because they are unsecured.
They are usually over a short term. (up to 7 years)
Housing Loans is usually based on a term of 20 to 30 years.
A long term loan is great for large borrowings (to buy a house).
An example of the difference is a $30,000 car loan, taken over five years with an interest rate of 10%. The interest content of the loan would be @ $8,244.68. New or used car loan.
If you borrowed this money on your mortgage over 25 years at the rate of 7%, then the total interest over the term of the loan would be a huge $33,610.13 - that's a difference of $25,365.45
The banks are happy to lend against the security of the family home.
An important fact to bear in mind when thinking about a long term loan is that most consumer goods (cars, boats, plasma TV lounge suites) depreciate in value and it makes sense to match the loan term to the expected life of the goods.
The examples used in this article relate to New car loans and used car loans.
The home mortgage relates to housing loans and mortgages in Australia.
Debt consolidation relates to using a housing loan and does not refer to bad credit loans and debt agreements.