September 8, 2023 UFinancial

6 Reasons for consolidating credit card debt into a home loan or personal loan

Escape the credit card trap: how refinancing and personal loans can rescue your finances

There are around 13.4 million credit card accounts open in Australia and the debt currently stands at around a whopping $49.147 billion, according to the Reserve Bank of Australia (RBA).

Are you drowning in a sea of credit card debt, struggling to manage multiple high-interest balances? If so, you’re not alone, many find themselves in this predicament, facing mounting interest charges and the stress that comes with it.

Fortunately, there’s a lifeline that can help you regain control of your finances: personal loans or consolidating into your home loan. There’s are benefits of doing both to consolidate credit card debt and take a step toward to financial freedom:

1. Actually pay off debt:

By choosing to consolidate your credit card debt with a personal loan or within your existing home loan, you’re making a proactive decision to pay down your debt rather than merely treading water with minimum monthly payments. Credit cards often keep borrowers in a cycle of debt because their minimum payments primarily cover interest charges, leaving the principal amount largely untouched. In contrast, a loan offers a structured repayment plan with fixed monthly payments that contribute to both principal reduction and interest.

2. Lower interest rates:

The average standard credit card rate is 19.94%, according to the RBA. One of the most significant advantages using an existing loan or taking out a personal loan for debt consolidation is the potential for lower interest rates. A loan typically offers fixed, lower interest rates, which can save you a substantial amount in interest payments over time. Doing this can secure a more affordable and manageable interest rate.

 

credit card debt consolidated

3. Simplified repayment:

Managing multiple credit card payments with varying due dates and interest rates can be overwhelming. However, with refinancing your home loan or taking out a personal loan you’ll have one fixed monthly payment. This simplifies your financials and ensures that you stay on track with your repayments. It’s easier to budget when you know exactly how much you owe each month, and when the debt will be fully paid off.

4. Defined payoff date:

Personal loans come with a set loan term, typically ranging from two to seven years. This means you’ll have a clear endpoint for your debt. Knowing when you’ll be debt-free provides motivation and allows you to plan for your financial future more effectively.

 

In the maze of financial struggles, credit card debt can often be a daunting adversary. But fear not, for there is a path to liberation – personal loans. Join us on a journey to discover how these unassuming loans can be your saving grace, helping you break free from the clutches of credit card debt. Explore the benefits and strategies that can lead you to a brighter, debt-free financial future.

5. Fixed monthly payments:

Personal loans and home loans come with fixed monthly payments, which can help you create a structured budget. Unlike credit cards where the minimum payment can change based on your balance, personal loan payments remain consistent. This predictability makes it easier to plan your finances and allocate funds for debt repayment.

6. Lower stress and improved financial well-being:

Consolidating your debt with a loan provides relief by reducing your overall interest costs and streamlining your payments. This can improve your overall financial well-being and peace of mind.

Using a personal loan or refinancing your existing home loan to consolidate credit card debt is a smart financial move for so many facing the challenges of high-interest balances. Lower interest rates, simplified repayment, a defined payoff date, and reduced stress are all compelling reasons to consider this approach. However, it’s essential to exercise financial discipline after consolidating your debt. Avoid accumulating new credit card debt and focus on repaying your loan according to the agreed-upon terms. With dedication and a well-thought-out debt consolidation plan, you can take control of your financial future and work towards a debt-free life.

If you want to find out more about personal loans, get in touch with our commercial and asset team today, click here.

If you want to look at refinancing your existing home loan, click here or email hello@ufinancial.com.au

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent. Content developed in partnership with IFPA.

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