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Debt Centre

Debt Indigestion Remedies

You are living on the edge, financially, but you are not alone. You may not have a default on your credit report yet, which is good, but about 1 in 7 credit reports have defaults listed, so it’s important to try to use your credit standing to move you to a better position.

  • Add up all your credit cards and think about taking out a loan to consolidate them. Average credit card rates are about 16% and average loan rates at around 12% are significantly cheaper, so savings are possible.
  • Before you apply, check your credit report to make sure it is error free so you have the best chance of success.
  • If your card debt is over $24,000, apply for two loans of half the amount you need – each lender will think you are shopping for credit and you’ll have a better chance of success applying for smaller loans.
  • Try to keep your loan term as short as you can. Repayment over 3 or 4 years is best if you can manage it. Don’t be tempted to extend the term beyond 4 years just to save a few tens of dollars in the monthly repayment, the increase in the total cost of credit will be horrendous.
  • Do not opt to take Consumer Credit Insurance, (CCI) which the Australia Consumers’ Association highlighted among its list of ‘junk insurances’. You can also read more about CCI by studying a separate report from the Australian Competition and Consumer Commission by clicking here. We think CCI adds to the monthly cost considerably and opting to take it won’t improve your chances of getting the loan.
  • If you have a home loan and have some equity in your property, think about re-mortgaging and consolidating your card and loan debt to a new mortgage. A new mortgage company will probably give you the best deal. Always try to use a ‘no fee’ broker – who’ll be paid by the mortgage company rather than by you – find out more at ASIC's MoneySmart here.

Competition and Consumer Commission and the Australian Securities and Investments Commission, called ‘Dealing with debt: your rights and responsibilities” This is available in English, Chinese, Vietnamese, Greek, Turkish, Arabic and Italian. Click here to find more.

Can't get a loan or remortgage? Try our suggestions on Moving Forward With Debt

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