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Feeling the unpleasant effects of a New Year debt hangover? Here are some options to help you manage your debts in the New Year.
Prioritise your debts
This means paying off loans that charge higher interest first. If you’ve got multiple credit cards, consider clearing cards with smaller amounts owed first and then cancel each card as you go, as some cards incur fees even with a zero balance.
Consolidate your debts
Convert all your individual loans into one loan, ideally at a lower interest rate. Two ways to do this are by taking out a personal loan or using your home loan.
You can also set up a personal loan to be repaid between one and seven years. Generally, the longer the repayment period the lower the regular repayments, but the more you’ll pay in total. Ensure your bank lets you make extra payments. Some banks penalise borrowers for paying down their personal loan faster.
If you have a home loan with a ‘redraw’ facility and you’re ahead on repayments, you can use the extra money to pay off other debts. Alternatively, apply to increase your home loan. Because home loans have a long repayment period (up to 30 years) and lower interest rates than personal loans or credit cards, repayments are lower; however, like personal loans the longer the loan, the more you pay in the long run.
Speak to your lender
If you can’t keep up with repayments talk to your lender. They may be able to extend your repayment period or temporarily postpone repayments.
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