You may have noticed that your mortgage just doesn't seem to pay ITSELF off. And, the banks are wonderful at giving you as much debt as they possibly can because the more money you owe and the longer you owe it, the more money they make from you.
There are three important ingredients to paying off debt...
The Interest Rate - low is of course good, but the lowest interest rate alone will not save you
Frequency of payments - the more often you contribute to your debt, the less interest you will pay
Most people these days have the above middle point under control, and some have the first point under control... BUT very few have the third ingredient. If you are missing one or more of the above 3 ingredients, then your mortgage will almost certainly last its full term of 20, 25, or even 30 years!
Unfortunately Australians have a lot of personal debt. Car loans/leases, furniture on rental agreements or higher purchase, credit cards, store cards... The list goes on forever! This really is not ok and will prevent you from getting ahead financially. Even if you feel the interest rate is low, the monthly commitment is likely to be high. You could be doing something much smarter with this money!
There is no question that debt consolidation can be a very good way of getting rid of your debts at a much faster rate. Of course, there are smart ways and not-so-smart ways of consolidating your debts though!
This really will only have the greatest impact if it is done as part of a very clear strategy to eliminate your debt with gusto. You would probably be surprised at how quickly you can be debt free!
Financial Planning Qld is a financial planning firm based in Brisbane, Queensland. We offer a full range of financial planning services and our advice is always underpinned by our Corporate Values. Click here to read more!