SYDNEY, Australia – Australian consumers are currently rushing to consolidate their personal loans from accumulated debts during the festive season.
Debt consolidation loans are rising as Aussie consumers become cash-strapped and struggling to manage their credit hangovers after the spending during the Christmas season.
Debt consolidation loans offer great relief to Australian consumers in terms of helping them get out of accumulating debts much sooner. Debt consolidation loans work in a way where debts are combined with a single personal loan, saving them from high interest costs that they would otherwise have to shoulder if they are paying those debts using credit cards. This type of loan also helps borrowers to manage all their debt repayments more easily by paying only a single set of account fees for their multiple debts.
Debt consolidation loans are usually offered for borrowers with a solid credit history and trying to avoid paying high interest rates by paying for their debts much sooner. Also, compared to credit cards, debt consolidation loans have a much lower interest rate, which provides a lot of relief to consumers trying to pay off multiple credit cards every month.
According to SocietyOne, a popular marketplace lender in the country said that January and February usually show a significant surge in consumers taking out personal loans. SocietyOne also said that the personal loan figures for January this year has also reached a new record.
The marketplace further stated that more than 60% of its personal loans are all for debt consolidations.
Meanwhile, the recent data published by the Reserve Bank of Australia also backed the same recorded from the lender. According to the central bank, the number of personal loans taken out by Australian in 2019 has increased by around 12% from the year before that, bringing around $167 billion worth of personal loans given. With that increase in personal loan figures last year, the central bank suggested to borrowers that they should start examining their spending and payment options.
Mark Jones, CEO of SocietyOne, said that it was good that there is an increasing number of Australians trying to gain control of their finances through debt consolidations at much lower interest rates.
Jones stated that debt consolidation is especially widespread during the first few months of the new year. It is when most people have made and are staying true to the resolutions they have made during the new year, he said. One of the common resolutions for people is to get a better grip when it comes to their finances, especially after a lot of spending during the holiday season. All this led to people making headways into getting rid of the debts accumulated after the holidays. Debt consolidation is also popular this early in the year with the anticipation of school fees arriving soon and for other people, realizing that they may have overspent due to a lot of excitement during the holidays.
Jones further stated that it is important for Australian consumers to never forget about reading the fine print. He suggested for the public to check if there are any early repayment fees or extra monthly fees, which can often undercut their savings.
Meanwhile, Shelley Davis, an advisory director at the RBK accounting firm, said that she got firsthand experience with battling credit card stresses after the Christmas holiday in the past, which is similar to the experiences of her clients at the moment who struggle with their debts.
Davis said that once upon a time, she was under that category, especially during her mid-twenties years. She said that during those times, she said that she was spending a lot on her credit cards as thought her accumulated debts would magically pay itself.
But, according to Davis, now that she’s pushing 40, those years are over, and she knows better about the best ways to handle her finances.
According to her, the credit card trap that Australian consumers often found themselves in, especially after the holidays, is a vicious cycle, and there is no questioning that. Further, Davis said that paying debts and the accompanying extensive interest rates across multiple credit cards pose massive damage to the consumers’ finances. But more than that, it has also become mentally damaging for Australians too, she said.
Davis also shared that debt consolidation is one of the first things she tries to discuss with all her clients every time she finds out that they are shouldering multiple loans at a time.
Among the personal loan interest rate options for Australian people is the Fixed 6.99% to 18.99% offered by Latitude Financial Services, 6.79% from Ratesetter, 7.95% fixed rate offered by Wisr, and the fixed 7.50% up to 9.99% offered by SocietyOne. There are also various lenders offering Australian other options for personal loans with varied interest rates and loan requirements as well. Some lenders also offer personalized interest rates to clients, depending on some factors like their Equifax Score Band.
Taking out debt consolidation loans wouldn’t affect the borrower’s credit rating.
Meanwhile, Angelo Benedetti, the managing director of Finance broker Financia, stated that their company had been swamped with countless applications from people for debt consolidations this February.
According to him, thinking about the figures this month compared to other months in a year, there are around 30% more Australians applying for debt consolidation loans from them.
Debt consolidation loans are not always marketed as such. But the same can be achieved by taking out a personal loan or refinancing a mortgage for those who own a house with adequate equity in it.
And according to Benedetti, around 90% of the debt consolidation loans they have approved at Financia are through mortgage refinancing loans, where borrowers can take advantage of much lower interest rates. However, he also warned borrowers that they need to maintain their settlements at a high rate and pay their debts much quicker.
Benedetti also said that people should do their homework to ensure that they are doing the best thing when it comes to the overall interest cost that they have to pay.
He explained that stretching a specific loan to more than 30 years will not do borrowers any good. Instead, he suggested to work out costs that they can pay in around two to three years.