| mortgage, investment loan, debt consolidation | 11 Nov 2008 12:00 AM |
| A good time to consider debt consolidation by Vicky Edema | |
I was sitting watching the TV this week when a ad came on promoting a leading bank’s new credit card offering. It looked very attractive in that it offered a rate of less than 3% p.a. on your existing credit card balance when transferred through debt consolidation. With the global credit crisis upon us, credit card interest has increased significantly with many credit cards now charging 19% + for retail purchases and cash advances. That is very expensive money when compared with the rate of interest charged on a mortgage. Debt consolidation can improve your cash flow immediately.
This leading lender however, is not promoting debt consolidation that will be to your benefit any further out than 18months. Sure you might only pay 3% for 18 months but then your credit card interest escalates to over 20% p.a. If you have a cash flow problem the 3% p.a. might look beaut but how are you going to manage when the rate is 20.74%? Rather than jumping from the frying pan into the fire one of the best solutions for you is to wrap up your unsecured credit card debt which will always be high no matter who you are with - into your secured home loan.
Because of the credit crunch interest rates have been dropping – we saw a 1% p.a. drop in October 2008 followed by a further 0.75% interest rate reduction in November. Mortgage interest rates are now again below 7% p.a. variable and there is every likelihood that they will reduce even further. So why take a short term quick fix solution and transfer your credit card balance to a 3% rate when you can remedy your problems for the long term through debt consolidation with your mortgage – add the credit card balance to your home loan debt and reduce your monthly cash outlay significantly and for the longer term.
Another costly outgoing is car lease repayments. Debt consolidation can help here as well. The lease payments on your car are generally at a much higher rate of interest than your home loan – cars are more likely to disappear than a property and are therefore a riskier lend for any financier. Through debt consolidation you can pay out the higher interest rate lease and reduce your monthly outgoings so that you are not under so much financial stress. Improved cash flow is the main upside of any debt consolidation exercise and it really should only be considered if you genuinely believe that you have to retain your car and credit card but in doing so you jeopardise your mortgage repayments. If you can sell your car and not have it impact too greatly on your work or lifestyle then rather than debt consolidation take this more financially sound path. A lot of people however rely on their car to get them to work so it is simply not a proposition to be without one.
There are downsides to debt consolidation. The negative aspect with debt consolidation is that you are converting short term debt to long term debt. While the debt consolidation reduces your monthly outgoing you will be paying that lower monthly outgoing for a longer period of time. Debt consolidation will usually mean that you will pay more interest than you would have under a short term loan but it will be easier on your cash flow because repayments are smaller. Smaller payments over a longer period of time. A car lease is usually for a maximum of 5 years at the end of which you usually sell the car and pay out any residual. The sale price of the car at the end of 5 years is normally the same if not better than the residual value so you are not having to put your hand I n your pocket when you sell. After debt consolidation, if you decided to sell your car at the end of 5 years then is it more than likely that you will not have paid off nearly as much of the car’s price – in other words after 5 years you owe more than the car’s residual value because you have not been paying it off as quickly. Be careful with debt consolidation – make sure it is the right choice for you.
This leading lender however, is not promoting debt consolidation that will be to your benefit any further out than 18months. Sure you might only pay 3% for 18 months but then your credit card interest escalates to over 20% p.a. If you have a cash flow problem the 3% p.a. might look beaut but how are you going to manage when the rate is 20.74%? Rather than jumping from the frying pan into the fire one of the best solutions for you is to wrap up your unsecured credit card debt which will always be high no matter who you are with - into your secured home loan.
Because of the credit crunch interest rates have been dropping – we saw a 1% p.a. drop in October 2008 followed by a further 0.75% interest rate reduction in November. Mortgage interest rates are now again below 7% p.a. variable and there is every likelihood that they will reduce even further. So why take a short term quick fix solution and transfer your credit card balance to a 3% rate when you can remedy your problems for the long term through debt consolidation with your mortgage – add the credit card balance to your home loan debt and reduce your monthly cash outlay significantly and for the longer term.
Another costly outgoing is car lease repayments. Debt consolidation can help here as well. The lease payments on your car are generally at a much higher rate of interest than your home loan – cars are more likely to disappear than a property and are therefore a riskier lend for any financier. Through debt consolidation you can pay out the higher interest rate lease and reduce your monthly outgoings so that you are not under so much financial stress. Improved cash flow is the main upside of any debt consolidation exercise and it really should only be considered if you genuinely believe that you have to retain your car and credit card but in doing so you jeopardise your mortgage repayments. If you can sell your car and not have it impact too greatly on your work or lifestyle then rather than debt consolidation take this more financially sound path. A lot of people however rely on their car to get them to work so it is simply not a proposition to be without one.
There are downsides to debt consolidation. The negative aspect with debt consolidation is that you are converting short term debt to long term debt. While the debt consolidation reduces your monthly outgoing you will be paying that lower monthly outgoing for a longer period of time. Debt consolidation will usually mean that you will pay more interest than you would have under a short term loan but it will be easier on your cash flow because repayments are smaller. Smaller payments over a longer period of time. A car lease is usually for a maximum of 5 years at the end of which you usually sell the car and pay out any residual. The sale price of the car at the end of 5 years is normally the same if not better than the residual value so you are not having to put your hand I n your pocket when you sell. After debt consolidation, if you decided to sell your car at the end of 5 years then is it more than likely that you will not have paid off nearly as much of the car’s price – in other words after 5 years you owe more than the car’s residual value because you have not been paying it off as quickly. Be careful with debt consolidation – make sure it is the right choice for you.
Set as favorite
Bookmark
Email This
Hits: 2121
Comments (8)
Subscribe to this comment's feed
written by Jackie, February 19, 2009
Certainly debt consolidation can improve your cash flow and make current situation easier. However, advice should be taken, before you add all sorts of debt on top of your mortgage.
report abuse
vote down
vote up
Votes: +0
written by Jamie Patterson, February 22, 2009
Personal Injury Settlement
Free Jobs at Home
Credit Card Application
Stock Market Quotes
Free Office Supplies
Job Share
Outbound Call Center
Medical Office Supplies
Settlement
Annuities
Payday Loans
Real Estate
Business Cards
Corporate Gifts
Call Center
Promotional Items
Work from Home
Work at Home
Rubber Stamps
Business Finance
Credit Report
Office Supply
Office Supply
Credit Card
Stock Market
Jewelry
Pandora Jewelry
Jewelry Cleaner
Tiffany Jewelry
Box Jewelry
Bridal Jewelry
Handmade Jewelry
Jewelry Retailer
Jewelry Repair Service
Kays Jewelry
Jewelry Armoire
Chanel jewelry
Jewelry Exchange
Jewelry Television
Wedding Favors
Laptops
Free Jobs at Home
Credit Card Application
Stock Market Quotes
Free Office Supplies
Job Share
Outbound Call Center
Medical Office Supplies
Settlement
Annuities
Payday Loans
Real Estate
Business Cards
Corporate Gifts
Call Center
Promotional Items
Work from Home
Work at Home
Rubber Stamps
Business Finance
Credit Report
Office Supply
Office Supply
Credit Card
Stock Market
Jewelry
Pandora Jewelry
Jewelry Cleaner
Tiffany Jewelry
Box Jewelry
Bridal Jewelry
Handmade Jewelry
Jewelry Retailer
Jewelry Repair Service
Kays Jewelry
Jewelry Armoire
Chanel jewelry
Jewelry Exchange
Jewelry Television
Wedding Favors
Laptops
report abuse
vote down
vote up
Votes: +0
written by xxx, November 07, 2009
Cash advances and cash advance lenders are often needlessly pilloried – even though they're no more evil than the credit card companies, in fact probably less so. Cash advances are simply tools to use in case of unexpected expenses, or in emergencies. You simply get a small loan for the most basic of expenses to hold you over until payday, and that's it. There's not a lot of mystery to cash advance loans, nor are they lent by mafia types in alleys by moonlight. It's not exactly Pandora's Box is it? If used responsibly, cash advances are perfectly fine, and just like any other financial tool, a short term loan is fine if you only get one once in a while.
report abuse
vote down
vote up
Votes: +0
written by Tom smith, January 06, 2010
I will be coming here again in a while to look more info and to find out more articles. This actually will earn some respect to the visitor when they read such a good info.
club penguin cheats
club penguin cheats
report abuse
vote down
vote up
Votes: +0
written by Tom smith, January 06, 2010
I am impressed from this post....the person who create this post it was a great human..thanks for shared this with us.i found this informative and interesting blog so i think so its very useful and knowledge able.I would like to thank you for the efforts you have made in writing this article.
club penguin cheats
club penguin cheats
report abuse
vote down
vote up
Votes: +0
written by payday loans, February 02, 2010
Payday Loans is a special type of loan provided by the banks preferable in the US. These types of loans are for short term only and are required to e paid before applying for the next loan.
Payday Loans
Payday Loans
report abuse
vote down
vote up
Votes: +0
written by Very informative, February 20, 2010
Very informative. Thank you for sharing it I am so impressed w/evernote so far. really pro stuff. thx folks
[code] scheduling software
[code] scheduling software
report abuse
vote down
vote up
Votes: +0
Write comment
Home
Great Mortgage Rates
Our Products
MORTGAGE CALCULATOR
Ask Vicky Q&A
Deposit Bonds
FAQ's & Case Studies
About Austral
Useful Links
Contact Us
