Debt Consolidation Home Loans: The Pros & Cons (Australia) - YouTube

Sam: If you're juggling multiple debts, one way to simplify your finances could be to

consolidate them into your home loan to make one easy payment per month.

Consolidating debt into your home loan can not only make managing your finances easier

but can actually save you money in the long run if it's structured correctly.

Hey guys, it's Sam from Lendi, Australia's number one online home loan platform where

we've helped thousands of Australians apply for a home loan.

Watch this video where we'll outline the key benefits and things to watch out for with

debt consolidation home loans and why doing your due diligence is important before refinancing.

Sam: Now before we start, if you're interested in getting great home loan tips in Australia,

make sure you subscribe to our channel and hit the bell so you can get notified when

we post new videos.

What are debt consolidation home loans?

A debt consolidation home loan is a specific type of home loan designed to consolidate

multiple personal debts into your home loan to allow you to make one easy monthly or fortnightly

repayment.

Some of the common types of personal debts that people consolidate into their home loan

are car loans, personal loans, and credit cards.

Since home loans have a much lower interest rate than personal debts, consolidating personal

debts into your home loan can save you interest in the long run.

Sam: One thing that you need to look for before you decide to consolidate this personal debt

is the way that it's structured to make sure you will actually be better off in the long

run.

So, what are the benefits?

You can save money and improve your cashflow.

A debt consolidation home loan can help you free up extra cash to focus on other financial

obligations.

You could also consolidate to a lower interest rate.

Unsecured debt such as credit cards, personal loans, and car loans can be on interest rates

anywhere from 8% all the way up to 25%, meaning it can be much more expensive to pay back.

Sam: Home loan rates start around 3% and go up to about 6% depending on your personal

circumstances.

That's why consolidating personal debt into your home loan will mean you're paying a much

lower interest rate, ultimately saving you money in the long run.

Finally, you can consolidate multiple repayments into one easy to manage repayment.

Instead of managing multiple debts, you can consolidate multiple repayments into one easy

to manage fortnightly or monthly home loan repayment.

Sam: What are the things that you need to look out for?

Firstly, are you extending your repayment loan term?

Personal debt and car loans usually need to be paid off in a set period of time of less

than five years.

When you consolidate this personal debt, you have the option to consolidate it into a shorter

loan term that can be a shorter period than the home loan.

For example, if your home loan has 25 years remaining, you can consolidate the personal

debt onto a separate split and pay it off over a three year term.

Sam: You need to consider the loan term that you want to place on the consolidated debt

as even if you're refinancing it to a lower interest rate.

If you're extending the loan term, you could actually end up paying more interest over

time.

A Home Loan Specialist can help you work out what the best option is going to be for your

specific financial circumstances.

Another thing to look out for could be the fees and charges.

There may be exit fees for the existing loans that you're consolidating to your home loan

and also application fees when applying for the new home loan.

It's important to always factor these costs in when you're working out your potential

savings and benefit to the transaction.

Sam: The final thing to look out for is to make sure you don't continue to accrue the

same debt.

If you're consolidating and paying off a credit card, don't forget to cancel the card after

settlement as some banks will not cancel this card for you.

How do you get approved for a debt consolidation home loan?

In order to qualify for a consolidation loan, you will need to prove good conduct on the

debts to be refinanced as well as borrowing capacity to borrow the total loan amount.

You'll also need a good credit score, sufficient equity in your property, and consistent income

verification.

Sam: Can you still consolidate debt if you have bad credit or bad conduct on the personal

debts?

If this is the case, you'll need to look at a non-conforming lender that will look at

the option for you, however, they will generally charge higher interest rates and more establishment

and upfront fees.

If you have bad conduct or credit issues in the past, the first thing is to actually check

the extent of your bad credit rating.

For more information on credit scores and how they impact home loans, check out our

tips to improve yours here.

Sam: That's it guys, everything you need to know about debt consolidation home loans.

There are a lot of home loan options out there and not all of them will be the right one

for you.

Before you apply, we suggest you speak to an expert to discuss your unique situation

and help you find a consolidation home loan that best suits your needs.

Jump onto lendi.com.au and pick a time to speak to a Home Loan Specialist.

Sam: Now if you're looking for more tips, you can also join our Home Loan Hacks Australia

Facebook Group where we'll answer any questions you have on all things home loans.

Finally, if you found this video helpful, please give us a thumbs up and add any questions

in the comment section below.

If you want more information on other relevant home loan topics, you can check out our other

videos here.

See you next time.