How Refinancing Could Save You Money and Help You Manage Debt

May 16, 2017

How Refinancing Could Save You Money and Help You Manage Debt

There are lots of reasons to refinancing, ranging from making it easier pay off your mortgage with a lower interest rate to investing in property or gaining more financial freedom with flexible home loan package features. One of the primary factors that drive Australians to refinance is to save money. Especially if you are dealing with high interest credit card debt, your home loan can serve as a powerful tool for improving your financial health.

Here are three practical ways in which refinancing can save you money and take some of the burden of debt off your shoulders.

Consolidating Multiple Debt Payments

Debt can be a complex matter. You probably have an auto loan, as well as a mortgage, not to mention having several credit card payments to manage every month (one in five Australians aged 35 to 54 owns at least 3 credit cards!). So, it’s no surprise that paying all your bills on time each month feels like a juggling act. Paying down numerous debts isn’t only time-consuming, it impacts your psychological health as well. The Australian Psychological Society’s annual survey on mental health has found that, year after year, personal finance issues are the top cause of personal stress.

Refinancing can take the confusion and stress out of debt management and help you save money in the process. You will be able to consolidate your debts within your home loan; no more varying due dates and interest rates, and no more anxiety over missing a payment somewhere within your pile of monthly bills. This, in turn, eliminates any expensive late fees and confusing rates. You’ll have one easy payment, and one interest rate; that’s it.

By simplifying matters with one payment, you also have the advantage of seeing exactly what you owe as one lump sum, and what are paying off each month. This clarity can make budgeting much easier, and make it simpler for you to work on paying off your debts.

Saying Goodbye to High Interest Rates on Your Credit Card Debt

While we all know credit card debt is something that should be avoided, sometimes life happens and we end up putting too much on the plastic. Australians rely on credit facilities for everything from vacations to utility bills, and, in some cases your credit card may be your only way to finance your lifestyle. You’re not alone if your credit card is significantly in the red. The average Aussie card holder is shouldering $4,300 in debt.

With credit card interest rates being so high, paying off this debt can be a real uphill battle. When you refinance, however, you can roll that high interest debt into your low mortgage rate. Moving four or five thousand in debt from a rate of 17 percent (a typical credit card interest rate) to 5 percent could save you hundreds of dollars a year in interest. You’ll also be able to get out of debt faster as more of what you pay each month will go towards settling your balance.

Avoid the Extra Charges

How much do you pay in fees and charges each year from your loan accounts? This is one more area where refinancing your home loan can help you to save money. Those annual fees for credit cards, transfer charges, and fees for your personal loan can really add up. By packaging everything with your mortgage account when you refinance, you can get rid of both expected and unexpected charges.

Being in debt isn’t fun. In fact, it can be incredibly overwhelming, especially if your money is being sucked away by late fees, high interest rates, and account charges. If you’re swimming in a sea of debt, refinancing may give you the relief you need.

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