Why more households are consolidating debt

Rising living costs are prompting more borrowers to consider debt consolidation as a way to reduce monthly repayments and create more breathing room in household budgets.

Shane Martin, Director of Shore Finance Co, said debt consolidation had become one of the most common topics raised by clients as families looked for practical ways to manage increasing financial pressure.

 

“Debt consolidation has been a really big one lately.”

He said the rising cost of everyday essentials was driving more people to review their finances.

“Obviously, with living expenses increasing, people are starting to look to ways to save some money and put it back into their monthly budget.”

Mr Martin said debt consolidation was not a one-size-fits-all solution, but it could be an effective strategy when structured correctly.

“There’s good and bad about debt consolidation, and it’s got a bad rap for a long time, but it can be a really useful tool when used the right way.”

He said borrowers should carefully consider how debts were combined, particularly when adding shorter-term loans to a home loan.

“If you’re consolidating maybe a car loan or a personal loan onto your mortgage, you don’t want to consolidate that over the life of the loan, either 25 or 30 years.”

Instead, Mr Martin said borrowers could benefit from separating the debt within their mortgage and repaying it over a much shorter timeframe.

“You want to set that up as a separate split and then set up the minimum monthly repayments to pay that out early, I think five, seven, 10 years.”

“That way you get the benefit of the lower interest rate, but you’re not dragging it over the life of the loan.”

Mr Martin said debt consolidation could provide meaningful budget relief for some borrowers, provided it was planned carefully and repayments remained focused on clearing the debt sooner rather than later.

This information is general in nature only and borrowers should seek professional advice based on their own financial circumstances before making decisions about debt consolidation. Anyone considering debt consolidation or looking to reduce pressure on their household budget can contact Shane Martin and the team at Shore Finance Co to discuss their options and determine whether debt consolidation is suitable for their individual circumstances.

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