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Should I consolidate my credit card debt?

May 3, 2015 by Jay Anderson

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Credit card debt can be crippling. With many institutions offering debt consolidation, it is tempting to rid yourself of the high credit card interest rates in return for a lower, long term rate that comes, for example, with a personal or home loan.

Here’s our take:

  1. It depends on why you have so much consumer debt in the first place. Will taking out another loan truly free you from that debt, or are you likely to keep your card and double the debt?

Yes? you need to get your spending under control. You might want to talk to a professional about budgeting and goal setting.

No? Go to 2.

  1. What kind of lending are you considering? Make sure you do your research:
    • If it’s a personal loan, make sure the interest rate is lower than your current credit card rate.
    • Check if the loan conditions are the best for your situation. You might well end up paying considerably more in interest over the life of the loan than you would with a disciplined period of paying off your credit card without the loan. On the other hand, your circumstance may be that this is the best way to maintain cash-flow while paying down debt.
    • If you are considering borrowing for an investment property, consider how a personal loan or increase to your mortgage may change your lending profile. Might it sway an institution away from lending to you?
    • It is generally best to keep personal and investment debt separate. We advise against using an investment flexi-loan, for example, to pay off personal consumer debt.

Before taking out any lending, talk to us, or your financial professional about options that will suit your needs.

Filed Under: lending

A. S12, L4, 150 Albert Road
South Melbourne VIC 3205

Ph. 1300 301 422
E. [email protected]
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