Are you in a debt crisis or not - some tips to determine this and how to find alterantives to change your situation.  Utilising the equity in your home, consolidating your debts, personal loans and credit cards.
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DEBT CRISIS OR NOT

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Ask yourself the following questions -
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Courtesy - Stuart Garvey
Midstate Financial Services - Orange, Central West NSW
Westlink Finance, serving Orange & Central West NSW.
Many people have a home with significant equity. Some of these people also have debts on high interest rate personal loans and credit cards. If this is your situation you could review whether it is possible to roll your other debts into your home loan. Some people say you should not do this because you are taking the debt out over a longer period of time. This would be true if you paid the bare minimum in repayments. If you continue to pay extra , or as much as you can afford without difficulty you will come out well in front.
  • Ensure your repayments are more affordable to ensure that you do not get any arrears
  • To obtain a cheaper interest rate and pay off the debts quicker if you can maintain the same level of repayments
  • Are your debts controlling your life?
  • Are you struggling to make your repayments?
  • Are you in a position where an increase in interest rates will make your repayments impossible?
  • Are you borrowing money from one credit source to make payments on another credit account?
  • Do you have debts on high interest rate accounts when you have other options?
UTILISING THE EQUITY IN YOUR HOME:
The main reasons you would do this is to:-
CONSOLIDATE LOANS INTO ONE PERSONAL LOAN:
If you have a number of debts and do not have a home you can borrow against you could look at a personal loan to roll the debts into. You must ensure that you do your homework and fully investigate the interest rates and fees. There are many options available. If the Banks are not competitive you can look at the Credit Unions or Building Societies.
If you answer yes to any of these questions you should review your current position and level of debt and consider what alternatives may be available.
DEBT CRISIS OR NOT:
-There are a few simple questions you can ask yourself to see if you are in a debt crisis or you may just have debts on higher than normal interest rates.
If you do consolidate your debts including credit cards you should cancel all but one of the cards to remove the temptation to re-use them and put yourself back in financial trouble. The one card you keep should be cleared in full each month if possible. This way you do not pay interest.
You must ensure that the rate of the new loan is less then the existing debts and that the repayments required better suit your current situation. Again if you do this you should cancel those credit cards that may have caused the debt problem in the first place.
FIXING YOUR INTEREST RATES:
If interest rates are on the increase this can add to the stress of having debt. One option to prevent the burden from growing is to fix you interest rates on your loans. If you are thinking about fixing your home loan you should consider the following options:
Reasons to Fix:
Fixed rate loans are not as flexible as variable rate loans. Borrowers can be penalized if they wish to make extra repayments and come have significant penalties if the loan is to be paid out in full during the fixed rate period.
If you intend to sell your property with in a three year period it would be unwise to fix the loan for a period of 5 years.
Fixed rate loans generally do not allow for offset accounts to be attached. If you use these offset accounts to help reduce the interest a fixed rate may not be your best option.
Part Fixed and Part Variable:
You can have part of your loan fixed and part on a variable rate. By doing this you are securing part of your loan on fixed but having the flexibility of a variable rate loan for the balance of you loan. You are having the best of both worlds and you can dictate the percentage that you would fix and the percentage you would have as variable.
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