3 reasons why debt consolidation can help you reduce your debt

Debt consolidation may help you reduce your debt and help you eliminate your debts within a relatively short time-frame. Debt consolidation is the process of consolidating all your debt (for example, credit card balances, overdrafts, store cards and so on) into one single personal loan, giving you one easy, manageable payment to meet on a monthly basis. You can do this using a debt consolidation loan.

Debt consolidation can:

• Reduce the amount of time your debt is paid

• Reduce the amount of interest you are paying

• Ensure that each payment reduces a large amount of your principal debt

Reduces the amount of time the debt is paid

When you only make the minimum monthly repayments, you are only prolonging the debt cycle. The problem with high interest rate debts is that only a small percentage of your payments actually go toward reducing your principal. However, with debt consolidation you can choose the term that the loan is paid in, for example, 3-5 years. If possible, you should choose the shortest term available in order to receive the most significant savings. Although your monthly payments may increase, the interest you pay is reduced drastically.

Reduces the amount of interest you pay

Through debt consolidation, it may be possible to:

• Reduce the amount of interest you pay

• Reduce your interest rate

• Reduce the amount of time that it takes for you to pay off your debt

The benefit of debt consolidation is that you are able to take all your multiple debts and consolidate it into a single low interest debt. Debt consolidation can allow you to halve your interest liability. For example, most credit cards and overdrafts often charge in excess of 15-20% interest, but the interest charged on a debt consolidation loan is significantly lower.

Each payment reduces a large amount of your principal debt

With a reduced interest rate, you can start to focus on reducing your actual levels of debt, as a greater percentage of your monthly repayments now go towards repaying the principle.

If managed correctly, debt consolidation is one of the most effective methods of reducing debt, as it allows you to pay less interest, reduce the term of the debt and look forward to a debt free future sooner.

If you need to consolidate debt or need help with budgeting, please speak to one of the finance advisors at Intellichoice today on 1300 55 10 45. Alternative, you can also use the budget planner to get started on savings.

Finance tips for car buyers

1. Avoid unsecured car loans if possible

Avoid using unsecured personal loans if you can put up some security for your borrowings. This will get you a lower interest rate. A home equity loan, or redraw of extra repayments, allowing you to borrow against the equity built up in your own home or an investment property, is the best option of all, and could get you finance at up to 5% less than a car loan.

2. Be clear about car leasing

Leasing is really just another form of borrowing to finance a car. Unlike car loan finance - where you take ownership of the car and offer it or something else as security to the lender – lease finance sees a leasing company take ownership and give you the use of the car under contract for a specified period.

3. Be honest in loan applications

Be honest about why you want the mortgage loan. Your mortgage may be able to offer you a mortgage loan option that better suits your circumstances. There are an increasing variety of different types of personal credit these days; car loans, commercial loans, leases, home equity loans, are just some of the examples.

4. Can't get a standard mortgage loan? There are alternatives

If the mortgage lenders won't lend to you because you're self employed, newly arrived in the country or have a poor credit history, consider a non conforming or "low doc" loan. The mortgage brokers at Intellichoice can assist you with a non conforming loan, low doc loan or bad credit loan for people who do not fit the traditional lending criteria. Please note that the interest rates on non conforming loans are generally higher, but come down after a few years of on-time repayments.

5. Check your statements for errors

There are claims that more than 50% of mortgage loan statements contain calculation errors. Simple mistakes, like the entry of the incorrect balance or the application of the wrong interest rate at the wrong time can be costly and mostly favour the mortgage lender. We all make mistakes, even bank computers make them and that's why borrowers should keep a close eye on mortgage loan statements.

6. Consider smaller lenders too

When shopping around for a car loan, consider community banks, credit unions and other smaller financial institutions which might be more approachable, and offer lower interest too. Alternatively, the mortgage brokers at Intellichoice will do all the research and legwork for you and find a mortage loan that suits your needs from their panel of approved mortgage lenders.

7. Do you have to take out a personal loan at all

Think twice before borrowing money without security. You may have a better option already available – for example, home equity extension to your home loan, a new loan that uses your property as security, a credit card, or even a family member.

8. Do you qualify for a 'relationship discount'?

Relationship discounts are available from mortgage lenders for those borrowers who consolidate a range of banking business with the one institution. Home and personal loan interest rate discounts, term deposit bonuses, savings account fee waivers and credit card annual fee waivers are commonly offered.

9. Don't just take the dealer finance

Don't accept mortgage loan or lease finance offered by a car dealer before comparing the offer with finance options offered by your mortgage lender. Dealer finance might be less hassle but you could well end up with an expensive mortgage loan and more restrictive terms and conditions. The same goes when buying furniture or any consumer goods where finance terms are offered.

10. Don't make multiple applications

Don't fill out applications at several mortgage lenders and have all of them checking into your credit history. This can make you look desperate and lower your credit score.

11. Don't rely solely on comparison rates

All mortgage lenders must now include "comparison rates" in advertisements for their home loans and personal loans to help consumers get a feel for their total cost - fees and the interest. Don't rely solely on comparison rates when choosing a loan and beware of their shortcomings. They only take into account fees and interest rates, not the features and how suitable the mortgage loan is for your circumstances.

12. Have the right information when applying

What you will be required to supply in any application for lease finance will depend on whether the lease is for personal or business use.

Personal lease applications will require:
• proof of current employment
• income details or tax returns

Business lease financing requires more detailed information and may include your:
• balance sheet
• tax returns
• cash flow projections
• business plan

Confirm with your mortgage broker or mortgage lender what you will need before the interview.

13. Keep accurate records

Keep accurate records of your deposits and ATM transactions. It is also wise to keep copies of your loan application and approval documents in a safe place. This is the best way to avoid hefty fees, which may be charged by a mortgage lender when its customers want to see copies of their cheques or loan files.

14. Know what interest rate applies

When offered car finance, either lease or loan, always be sure you know what interest rate applies. Lenders often 'sell' you their finance packages by quoting the monthly repayments only. This may disguise a high interest rate.

15. Understand what's on offer

Is the interest rate fixed or variable? What up-front, annual or ongoing fees are charged?

If you need a car loan or personal loan, speak to the mortgage broker at Intellichoice on 1300 55 10 45. We can help find a mortgage loan to suit your needs.

Why consolidate your debt

A debt consolidation loan is a single loan that you use to pay off other debts leaving you with just one repayment to make, thus, saving you time and money.

How does a debt consolidation loan work?

A debt consolidation loan replaces multiple loans (such as credit card debt, personal loan debt and other unsecured debt) with a single personal loan usually at a reduced rate of interest.

Many individuals make use of debt consolidation loans for the following reasons:

One payment

A debt consolidation loan is the replacement of multiple loans and debts, such as credit cards and unsecured personal loans with a single personal loan. A debt consolidation loan means you only have to make one payment instead of making numerous payments each month.

Affordability

With a debt consolidation loan you may end up with a lower monthly repayment and a longer repayment period. This can help some people to manage their finances more effectively.

Lower rates of interest

A debt consolidation normally consolidates existing credit card and personal loan debts at a lower rate of interest. This will allow you to save money.

Help eliminate creditor pressure

It is very easy to fall into debt, but often much more difficult to get out. With multiple credit card and personal loan repayments, it may be difficult to manage your finances. This may lead to creditors contacting you to arrange payment. A debt consolidation loan may assist you in eliminating creditor pressure because you are only dealing with one mortgage lender.

Protect your credit rating

Having multiple credit card and personal loans may result in late payment and this may affect your financial record or credit rating. A debt consolidation loan may assist you in making your monthly payments and managing your financial affairs more effectively.

For more information about debt consolidation loans and how we can help you consolidate debt into one easy repayment, speak to one of the mortgage brokers at Intellichoice today on 1300 55 10 45.

Deciding between secured and unsecured loans

Finding the right mortgage loan for you and your financial needs is important - after all, you don't want to pay any more for your mortgage loan than you absolutely have to. When shopping around for a mortgage loan, you might find yourself facing a decision between applying for secured or a unsecured loan.

If you're not entirely sure what the difference is or which type of mortgage loan is right for you, then the information below should shed a little bit of light on these two different types of loans and when the best time is to use each.

Secured Loans

Secured loans use collateral (some item of value that can be sold to recover the money that has been borrowed if the borrower is unable to repay the loan) as security to guarantee the repayment of the loan.

As a result of the collateral that is used to secure the personal loan, mortgage lenders are usually more willing to grant lower interest rates for secured loans. The interest rate offered depends upon the credit rating of the person applying for the loan as well as the value and ease of finding a market for the item used as collateral.

Unsecured Loans

As the name might imply, unsecured loans are loans that do not use collateral as a guarantee that the loan will be repaid. Because of this, unsecured personal loans are much more likely to have a higher interest rate.

These personal loans are still advantageous, however, since there is no collateral that could be seized and sold by a mortgage lender. Unsecured loans are generally given to individuals with good credit, though depending upon the amount to be borrowed, there are some unsecured loans which are offered to individuals with less-than-perfect credit as well.

When to Use Secured Loans

Secured loans can be used in a variety of different circumstances, for example, if the individual who is applying for the loan doesn't have the best of credit. This doesn't mean that secured loans are used exclusively by individuals with bad credit - many people with good credit still choose to use secured loans for their needs because they can get a lower interest rate that way.

Additionally, some high-value items such as real estate and automobiles serve as the collateral for their own loan and therefore don't have much of an option aside from secured loans. The larger the amount to be borrowed is, the more likely you are to have to take out a secured loan to borrow it.

When to Use Unsecured Loans

Since they don't have the guarantee of collateral, mortgage lenders are generally much more careful when issuing unsecured loans. For lower-value loans, however, unsecured loans can be very helpful. Short-term mortgage loans that are unsecured can save on paperwork and remove the fear of losing your collateral, all the while not hurting you too much with a higher interest rate because of the shortened amount of time that it takes to repay the loan.

Though many mortgage lenders are hesitant to make unsecured loans to individuals with poor or bad credit, a thorough search can help you to find mortgage lenders willing to make unsecured loans to individuals regardless of their credit. This can be useful in catching up on some bills, consolidating them into the single unsecured loan payment.

If you are looking for a secured personal loan or an unsecured personal loan, speak to an Intellichoice mortgage broker on 1300 55 10 45 and we will help find the best mortgage loan for you based on your needs and circumstances.