Tips on Reducing Expensive Credit Card Debt

When you first contact our mortgage brokers for a home loan in the Rockingham, Kwinana and Baldivis area, they will ask for some basic information about your finances. This helps them get an idea of which lenders will be the best for your situation.

Reducing Credit Card Debt  Tips by Mortgage BrokersOne pattern we have noticed is that a lot of people applying for home loans have significant amounts of credit card debt. Credit card debt is exceedingly expensive compared to a home loan. Sometimes the interest on a credit card can be more than 20%, compared to 5% or less on a home loan.

If your interest rate is 20% and you have $30,000 in credit card debt, your monthly repayment will be $900. If you have that same $30,000 on a home loan at 5% interest, your monthly repayment will be $161. It will take 30 years to pay off and you will pay a total of $27,976 in interest.

For comparison, the same debt on a personal loan at 14% would require payments of $698 per month over 5 years with total interest of $11,874.

Sometimes, we can help you consolidate credit cards and personal loans into a home loan, but for many, that option isn’t available. Besides, we believe that long term debt should only be used for assets that can be reasonably expected to appreciate in value. If you spend home loan money on a boat, car, LCD screen or a holiday, you usually won’t have much to show for it by the end of the loan. However, consolidation is a great way to lower interest payments.

If a consolidation loan isn’t possible for you, we have one solution: cut it up and pay it off.

Cut it Up and Pay it Off

We know that it is difficult for many of us to cut up our credit cards. Credit cards have become a way of life for many in this era. Indeed, a credit card is mandatory to provide security for many transactions such as car or hotel rental. However, debit cards are available through both Mastercard and Visa that provide the same options as a credit card, but without creating more debt. They can even be used to put credit card debt on automatic fixed payments.