If you are like most Australian consumers, you more than likely have succumbed to the convenience using credit cards as a funding source to get the things you want in life. It takes a great deal of discipline using credit cards on a monthly basis to make extraordinary purchases or even casual payments for a night out on the town or to buy that special pair of shoes you found while out on a normal shopping excursion. Some people, when faced with tough economic times, turn to credit card use as a temporary funding solution that, unfortunately, can result in a not-so-temporary debt problem. The lure of easy credit snares quite a few, so there is no need to be embarrassed. There are many fellow Australians in the same predicament in which you may find yourself. However, for homeowners, credit card relief is available.
Mortgage Refinance is a Smart Debt Reduction Method
You might think that through refinancing your home to pay off credit card debt you are only getting deeper into trouble. This is far from reality. Most credit card companies charge interest fees on money “borrowed” that are doubled, if not tripled, that accompanying a home mortgage. Paying the credit card minimum balance each and every month, while keeping you in good standing, does nothing to reduce, let alone eliminate, your outstanding principal. Through using one of many mortgage options, the funds produced can go to pay off your credit card balances. The monthly mortgage repayment fee will probably be less than the combined debt payments you are making now because the interest charged is much lower. This may be the best mortgage refinance advice you can get.
How Would it Work?
Here’s an example showing that if you had an outstanding total debt on all your cards of $8,000 – with an average interest rate of 16 percent – while making monthly payments of $300 on each card you would be paying $1,952 in interest, which is one-quarter of your outstanding balance. Furthermore, using this example it would take you at least three years to pay them off – including the accompanying interest fees. Now, if you consolidated this debt into one loan at 7.5 percent interest – still making a $300 repayment, you would wind up paying only $779 interest – a savings of $1,173. You could have the cards paid off in two and a half years. Also, if you wanted to free up some extra dollars each month, you could repay $250, instead of $300. The result would be paying $954 in interest – still a savings of $998, but you would have an extra $1,800 through the three years when the cards would be paid off.
Discipline First to Eliminate Debt
There are two things to consider when using mortgage refinance as a vehicle to eliminate debt. The first is that you need to qualify. Secondly, you need to prepare yourself through using a mortgage calculator to determine how much you can borrow and what the costs will be to obtain a loan.
Then, you need to stop using your credit cards and live within a budget created to better manage your money.
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