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Using debt to regain control of your finances

Many of us have been keeping a closer eye on our finances in the past few months.

Whether you’re a homeowner with a mortgage or someone with a higher credit card balance than you’re comfortable with, here’s how you can use debt for short-term relief and long-term resilience.

Need to boost your cash flow?


If you’re in a short-term bind, you might consider a repayment holiday.

This means that you don’t make any payments for a period of time you agree with the lender. Interest accrues though, so you’ll either have higher payments when you come out of the holiday or you’ll pay off the loan for longer. We can help you work out whether that’s a good option for you.

You could also restructure the mortgage, to reduce the payments – for example, by extending the term of your home loan. Keep in mind that, with this option, you’ll need to weigh up short-term relief with the longer-term cost at the end.

If you’ve been paying your loan off for 10 years, say, you may have 10 left to go. If you restructure it so that you pay it off over 15 instead, that will reduce your payments significantly. However, the overall interest cost will be higher at the end of your mortgage.

There are very low rates on offer from lenders at present, too – if you’re approaching the end of a fixed term and fixing is right for your situation, we can help you work out how much you could save simply by refixing at a lower rate.

Personal loans and credit cards

If you want to reduce your debt repayments, you’ll either need to find a cheaper interest rate or stretch out the term of the loan in a similar way.  Once again, keep in mind that extending the term is likely to increase the total cost of your borrowing.

Responsible lending rules give you some rights if you’re really in strife. If you’re in significant hardship, you can make a request for the term of the loan to be extended, or a payment holiday. Keep in mind that your lender may be able to offer these assistance options only if you don’t have too many payments in arrears. So please get in contact with us and your lender as soon as possible, before getting too far behind.

It’s sometimes possible to get a reduced-interest offer if you’re willing to shift your credit card business to another lender – this can be a good option if you can focus on getting rid of it once you do so.

Just want to get rid of it?


  • Increase your repayments

By increasing your repayments, the mortgage disappears much more quickly because all that extra money reduces the principal owing. And because the interest you pay is calculated on the outstanding principal balance, you’re likely to pay less interest over the term of your home loan.

If you’re on a floating rate, you can usually boost the repayment amount (or make lump sum payments) without incurring a fee or penalty. On the other hand, if you’re on a fixed rate, it’s important to check whether a fee or penalty is involved before making any additional payments. Some lenders allow borrowers to bump up their repayments by a certain amount without incurring a fee, but make sure you talk to us or your lender before adjusting your repayments.

  • Break up the loan

You might not be able to increase your payments on the total loan, but you could break it up into smaller pieces and focus on bumping up the repayments on one portion to get rid of it faster. This could help you snowball to bigger repayment success.

These are just two of the helpful strategies you can put in place to pay off your mortgage faster. There may be others, depending on your situation. Like to know more? Please don’t hesitate to contact us.

Personal loans and credit card

There are a couple of ways that many people find success: The snowball and avalanche methods.

‘Snowball’ is where you pay off the smallest debt first, then roll the money you were paying on that debt into the next smallest balance, and so on. This can be a good option for people who like to celebrate successes to stay motivated.

‘Avalanche’ is an accelerated plan for repaying high-interest debt (like credit cards and business loans). Basically, you focus your attention on the highest-interest debt first, then put any additional resource you have towards the next highest-interest debt, working your way down. This can be a good strategy if you’d like to reduce the amount of interest you pay and save money in the long run. 

Need to feel more in control?


If you have a few payments going out at different times, you can ask for them to be streamlined so that they go in sync. If your home loan isn’t shown on your online account, you can ask your lender to set up access so you can track your progress.

Tools such as those at Sorted can be helpful to try out different scenarios, and of course, we’re here for your questions.

Personal loans and credit cards

You may have heard of “debt consolidation” loans. These can be good for people who have multiple loan payments going out of their accounts on different days of the month, and are struggling to keep up with what’s due and when.

Debt consolidation loans are often touted as a way to get more control of your debt, because it becomes just one payment that’s usually lower than the multiple-debt payments combined

But loans that are marketed as “debt consolidation” often come with quite high interest rates, so it’s worth comparing what you’re offered with what you already have – and the total bill you’re set to pay with each.

People who have a home loan often choose to consolidate their personal debt on to their mortgages, because the interest rates are much lower.

But you’ll need to make sure that you don’t set it up in a way that means you pay off the extra over the entire term of your loan. Even at a low interest rate, if it takes you 30 years to pay off your $5000 credit card debt, that’s an expensive option.

Get in touch

Don’t let your debt get the better of you. We are the home loan experts and would love to help you work out the right structure to have you feeling freer, faster. Give us a call or email today.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.