Is it time to review your debts and think about debt consolidation?
It is so easy to get into debt for small purchases and before you know it you have a number of these debts which are often expensive.
Consider some of these debts;
Credit Cards – ANZ have a low rate Visa which has an interest rate of 13.90% but the other cards will charge you 20.95%. Most banks are similar and then cards like the GEM Visa charge a higher interest rate of 24.95% unless there is some interest free deal being promoted by a retailer.
Store Cards – a lot of retailers use the GEM Visa but a lot of people have a Farmers Card which charges 25.50%
Personal Loans – banks love to provide personal loans but they are not the cheapest way of obtaining finance. ASB Bank advertise unsecured personal loans from 13.95% to 19.95% and even the secured personal loans are 12.95%. You can often get personal loans from non-bank lenders and peer to peer lenders at more favorable interest rates.
Vehicle Finance – interest rates for vehicle loans vary a lot with the major companies like MARAC offering rates from 9.75% to 19.95%, MTF Finance from 9.75% – 21.75% and UDC from 9.35% to 14.55%. Other companies might do some of the harder to approve deals and bad credit loans but the interest rates reflect the higher risk with Finance Direct charging up to 24.95% and Finance Now up to 27.95%.
Getting into debt in New Zealand is often too easy.
Many retailers have arrangements with lenders to fund purchases and these loans can be approved online or in minutes rather than hours or days. Of course the lenders may take short cuts and accept more risk, but with the higher interest rates they are making enough to cover a few losses along the way.
But why would you pay more that you should when there may be better options available?
About Debt Consolidation
A lot of people think of debt consolidation loans when their debts start to become a problem for them, but really people should make a conscious effort to review their debts and think about debt consolidation either as a specialist loan or by incorporating the expensive debts into their mortgage at the lower interest rates.
Specialist Debt Consolidation Loans – if you do not have a property or have a large mortgage which means you cannot do a top-up then a specialist debt consolidation loan might be the best option. The key thing to consider is the overall cost as sometimes the loans promoted as the ‘so called’ best option can end up more expensive and only spread the repayments out over a longer timeframe.
Using Your Mortgage For Debt Consolidation – mortgage finance is some of the cheapest money that you can get and therefore you should think about debt consolidation using your mortgage; however it is generally recommended that you make sure that the loan is not spread out over 30-years like many mortgages are – you car or computer will need replacing a lot sooner than that!
Contact a mortgage broker and they can discuss the options with you.