Your forties and fifties is a life stage where it can be vital to work towards reducing your debt. This may seem difficult but, whether you still have dependants studying or you’re living off a single income, it’s still possible to do. The keys are adopting good financial habits and possibly changing your attitude towards money – which can both result in improving your financial position. Below we’ve listed a few factors worth considering.
- Reduce your spending – this will help you redirect spare funds into any loan or credit card that you may have. In turn, this will reduce the amount of interest you pay. Review all areas of your expenditure – including utilities, groceries, insurances and your everyday banking. An hour or so spent on your budget can result in saving a significant amount of money over the longer term.
- Consolidate your finances – if you have more than one type of debt, whether it’s a home loan, personal loan or multiple credit cards, consider consolidating the debt into one loan for one more manageable repayment. Aligning repayments with your pay cycle and arranging for regular transfers into your loan account can ensure the debt is repaid on time and avoid being charged extra arrears fees.
- Increase your home loan instead of turning short term debts into long term debts. If you increase your mortgage to buy a car or go on a holiday because the interest rate is more competitive, try to avoid paying off the debt over the original term of the mortgage. This is because you will pay more in interest than what the original debt was worth. If you do increase your mortgage, consider asking for a shorter term.
- Consolidation not an option? Begin by repaying the highest interest rate debts first. There’s no point having funds sitting in a savings account if you’re paying more in interest than you earn. The overall effect means it’s costing you more money. If you are having difficulty meeting repayments, speak to the credit provider to set up a payment arrangement to avoid your credit rating being affected.
- Replace credit cards with debit cards if you are not a disciplined spender. Debit cards provide the flexibility of a credit card but they access your own funds, so you’re at no risk of accumulating extra debt.
- Making extra repayments to your home loan can save you money and reduce the term of your loan. Use our Extra Repayments Calculator to calculate the time and interest you can save by paying more than the minimum repayment.
- Pay extra when possible – when you receive a pay rise, tax return or any other cash windfall; direct the funds to your debts. Even small amounts will help reduce the amount of interest you pay over the term of the loan.
- Seek advice – if you have questions about your debt levels, don’t hesitate to contact us on 1300 654 822. It may be possible to restructure your loans or adjust your repayment cycle to help you get on track to improve your finances.
This information does not take into account your objectives, financial situation or needs. Therefore you should firstly consider the appropriateness of this information and refer to the Terms and Conditions and Product Disclosure Statement (PDS) before acquiring a product. These documents are available by contacting us on 1300 654 166.