Expert tips: 3 ways to spring clean your loan and credit card debt
Spring has well and truly sprung. And while this may have you turning your attention to dusting off drawers, clearing out your winter wardrobe or tending to the garden, now could be the time to spring clean your finances as well!
And what’s a big part of many Aussies’ personal finances? Loan and credit card debt.
So we’ve spoken to the experts.
Combining the knowledge of Mozo’s banking expert Peter Marshall, Athena’s chief marketing officer Natalie Dinsdale, Nano Digital Home Loans’ chief executive officer Andrew Walker and Alex’s chief financial and product officer Craig Fenwick, here are three top tips on helping you pay down your debt this spring!
1. Refinance your home loan
“So why refinance? Why wouldn't you is more the point!,” says online home loan lender Athena’s chief marketing officer, Natalie Dinsdale.
According to Athena, the average owner occupier principal and interest variable refinance home loan rate for September 2021 sits at around 3.14%. Dinsdale explains that if you’ve got a rate that doesn’t start with a two or lower, it’s time to do a home loan health check and consider refinancing.
“Refinancing your home loan is simply swapping your existing mortgage for a new (and hopefully better) one, which often means you’re looking for a new lender as well,” she says.
“Major lenders tend to give all their best rates to new customers rather than to their faithful existing ones, leaving you feeling a little unloved and under-appreciated. They cheat on you, it’s time to cheat on your bank.”
Nano Digital Home Loans chief executive officer and co-founder, Andrew Walker calls this a “loyalty tax.”
He also says that refinance customers should look for lenders that offer an offset account on their loan products. According to him, not only can it help you bucket your money in one place, it also reduces the overall interest you pay on your home loan.
“The best thing you can do is reduce the interest you’re paying on what is most likely one of your biggest financial investments.
“Find a lender that offers you a free 100% offset account – like Nano’s offset sub account – and get your salary, rent, payments, savings moved into it. Every dollar makes a difference over time. Be smart with your money and make sure you can put funds away for certain goals.”
Want to compare refinance home loans? Take a look at these top options below …
Top refinance home loans
Athena AcceleRATES Variable Home Loan
- Refinance up to $2,000,000
- Low variable rates from 1.99% p.a. (1.99% p.a. comparison rate*)
- No fees
Need to refinance your current home loan to an option with low rates, no fees and repayment flexibility? Meet the Athena AcceleRATES Variable Home Loan, which took out three 2021 Mozo Experts Choice Awards^^ for Best Home Loan Innovation, Best Low Cost Home Loan and Best Investor Home Loan. With this loan, customers can refinance up to $2,000,000 and variable rates are offered based on loan-to-value ratios (LVRs). For owner occupiers, rates start at a low 1.99% p.a. (1.99% p.a. comparison rate*) for borrowers with an LVR of 60% or lower, and go up for customers with LVRs up to 80%. For investors, rates follow the same LVR structure and start at 2.39% p.a. (2.39% p.a. comparison rate*). Athena also doesn’t charge any fees on this loan, so that means you won’t pay things like application, ongoing service or discharge costs. And when it comes to repayments, there is the choice of a weekly, fortnightly or monthly schedule as well as the ability to make free extra repayments and redraws. There is no offset account available on this loan.
Nano Variable Home Loan
- Refinance up to $2,500,000
- Low variable rates from 1.99% p.a. (1.99% p.a. comparison rate*)
- No fees
If you’re looking to refinance your mortgage with a low-rate online home loan lender, Nano’s Variable Home Loan could be worth considering. Not only does Nano offer low variable rates that start at 1.99% p.a. (1.99% p.a. comparison rate*) for owner occupiers and 2.29% p.a. (2.29% p.a. comparison rate*) for investors, there are no upfront, ongoing or discharge fees. Borrowers can refinance up to $2,500,000 with this loan and must pay it back on a monthly repayment schedule, there is no option for weekly or fortnightly repayments. The good news is though, Nano allows customers to make free extra repayments and redraws whenever they like. Plus, there is the option of an offset account.
2. Consolidate your personal debt
When it comes to personal debt, consolidating your multiple repayment plans can be a time and money saver. From personal loans and car loans to credit cards, a debt consolidation loan is a way to pay off multiple personal debts with one interest rate.
“Debt consolidation is when you combine multiple debts into a single loan,” Alex chief financial and product officer, Craig Fenwick explains.
According to Alex Bank, approximately 20% of its customers have taken out a debt consolidation loan, with the average loan amount just under $17,000.
“Consolidating means you only have one loan, one interest rate and one repayment to manage. Many consolidation loans involve paying out high interest credit card debt, hence you also might save some money too,” Fenwick says.
In fact, according to the Mozo database, the average unsecured personal loan rate (generally what a debt consolidation loan is) sits at 9.74%, while the average credit card rate is a higher 16.88%. Also note, sometimes debt consolidation loans can be secured, where you may receive an even lower rate by putting up an asset as collateral.
Mozo’s banking expert, Peter Marshall says debt consolidation can be a good option for consumers struggling with multiple debts, as long as they make their repayments on time and don’t fork out too much in fees.
“For customers with multiple debts, remember that while a debt consolidation loan might offer a low rate, it’s crucial to stay on top of your repayments once you sign up or you could end up incurring late fees and greater interest charges,” he says.
“While it’s true that a debt consolidation loan is there to help make repayments easier, you’ll still need to put in the leg work to pay off what you owe each time a payment is due.
“And don’t forget to consider things like application and ongoing service fees, as these additional costs may stack up and could even outweigh what you save by rolling your debts into one.”
Also note that it’s not a good idea to include your home loan debt in a debt consolidation loan. This is because home loans are generally longer (about 20 or 30 years) and have lower rates, so combining it with other personal debt might end up costing you more in interest over time.
Considering a debt consolidation loan to get on top of what you owe? Check out these killer options …
Top debt consolidation loans
Alex Bank Personal Loan
- Consolidate debt up to $30,000
- Fixed rates from 5.45% p.a. (5.45% p.a. comparison rate*)
- No upfront, ongoing or early repayment fees (conditions apply)
Consolidating your debt could be made easy with an Alex Bank Personal Loan, which was awarded a 2021 Mozo Experts Choice Award^ for Best New Loan Product. With this product, customers can consolidate their debt of up to $30,000 over one to five years and receive a fixed rate from 5.45% p.a. (5.45% p.a. comparison rate*) based on their credit rating. On top of that, there are no upfront, ongoing or early repayment costs attached to this loan as Alex Bank is currently waiving the $295 upfront establishment fee on approved applications made by 30 September 2021. When it comes to paying back the loan, there is a choice of making weekly, fortnightly or monthly regular repayments. Plus, Alex Bank also allows customers to make free extra repayments. Just bear in mind though, there is no redraw facility so you cannot access your additional contributions once they have been paid.
OurMoneyMarket Low Rate Personal Loan
- Consolidate debt up to $75,000
- Fixed rates from 5.45% p.a. (6.07% p.a. comparison rate*)
- Extra repayments and redraws allowed
After an award-winning debt consolidation loan? Say hello to the OurMoneyMarket Low Rate Personal Loan that snapped up a 2021 Mozo Experts Choice Award^ for Best Unsecured Personal Loan. OurMoneyMarket allows borrowers to consolidate debt of up to $75,000 and offers loan terms between one and seven years. Based on an applicant’s credit score, fixed rates start at 5.45% p.a. (6.07% p.a. comparison rate*). For repayments, there is the choice of weekly, fortnightly or monthly as well as the option to make free extra repayments and redraws. There are no ongoing service charges or early repayment penalties with this loan, however it’s important to budget for a $250 upfront establishment fee when you first sign up.
3. Find a balance transfer offer
If your biggest trouble is paying off your credit card debt, a 0% balance transfer offer might be exactly what you need.
“Despite other lending products, like home loans and personal loans, seeing drops in rates over the years, the story isn’t the same for credit cards,” says Marshall.
“In some cases, consumers with unmanageable credit card debt are facing hefty interest repayments on what they owe. But that’s where a 0% balance transfer offer can help.”
Right now on the Mozo database, there are a bunch of 0% balance transfer offers ranging from five to 36 months. What this means is that credit card providers allow customers to transfer their credit card debt onto a new card and may offer them 0% interest as they pay it off for a set amount of time.
“A balance transfer allows a consumer to focus on paying down their credit card debt without worrying about being charged interest,” Marshall says.
“The catch is that any new transactions made on a balance transfer card will be subject to interest charges, which can be hefty. However, for those looking to clear debt this can be seen as a benefit as it is a solid deterrent for cardholders to indulge in unnecessary spending.”
If you want to take advantage of a balance transfer to help clear your credit card debt, have a peek at these products below …
Top balance transfer credit cards
Kogan Money Black Card
- 0% p.a. balance transfer rate for 12 months (21.74% p.a. after)
- $0 annual fee
- Rewards program
Need up to a year to pay down your credit card debt? Well, the Kogan Money Black Card offers a 0% p.a. balancer transfer rate for 12 months (no balance transfer fee), giving you plenty of time to pay back what you owe without worrying about interest. On top of that, there is no annual fee attached to this credit card. And once your balance transfer period is up, if you continue using the card there is a rewards program you could take advantage of. Earn up to 2 Kogan points per $1 spent on eligible purchases made on the card, as well as receive up to 55 interest free days on eligible purchases (rewards points and interest-free days only available once the BT offer is over - T&Cs apply). Bear in mind though, after the 0% balance transfer period the purchase rate on this card reverts to a hefty 21.74% p.a.
PayPal Rewards Card
- 0% p.a. balance transfer rate for 20 months (20.99% p.a. after)
- $0 annual fee
- Rewards program
Paying off your credit card debt doesn’t have to cost you truck loads in interest. In fact with the Paypal Rewards Card, not only do customers receive a solid balance transfer offer of 0% p.a. for 20 months, there are also no balance transfer or annual fees to worry about. And for those looking to use the card once the balance transfer offer is up, while the rate reverts to a high 20.99% p.a. there is a rewards program and interest-free days on offer. With PayPal Rewards, cardholders can earn up to 1 point per $1 spent on eligible purchases and there are up to 55 days interest-free on eligible purchases too (T&Cs apply). Don’t forget though, rewards points and interest-free days only apply to purchases made outside of the balance transfer offer timeframe, not during it.
Want to find out how you can spring clean your finances even more? Head over to our home loan comparison page, personal loan comparison page or credit card comparison page for more providers and all the info you need!
^^See information about the Mozo Experts Choice Home Loan Awards
^See information about the Mozo Experts Choice Personal Loan Awards
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