Mortgage buster 10 New Year’s resolutions to get you out of debt in 2013
HOME loan borrowers are being urged to take advantage of record low interest rates to slash debt and act their wage’ in 2013.
Crown Lending ceo Scott Parry, who has studied seasonal debt, said consumers were more likely to experience debt-related stress in January than in any other month, making the new year the ideal time to take action against debt.
“How often do we make the same New Year’s resolutions every December, whether it’s to lose weight, eat better, drink less or exercise more, only to fall off the wagon after a month or two at best?” MrParry said.
“The same pattern applies with debt reduction where, come 1 January, you’re no better off financially than you were the year before because you don’t make the changes to your banking structure that will enable you to prosper financially.”
In sharp contrast to the culture of debt and borrowing that characterised the boom years, Mr Parry said Australians should be encouraged to take control of their finances and reduce debt.
“The start of a new year is an ideal time to take stock of your finances and take some simple steps to reduce debt,” Mr Parry said.
“As rates decline, housing affordability improves and home loan repayments moderate. Rather than borrowing more, homeowners should take this opportunity to increase their repayments or make additional repayments on their loan. These simple steps can shave years off the loan term and save thousands in interest.”
Mr Parry said home loan interest rates were predicted to fall even further in 2013, creating the ideal opportunity for home loan borrow- ers to slash years from their home loan.
“It has always been the great Australian dream to own your own home but many people struggle to pay off their loan and end up in debt for 30 years or more,” Mr Parry said.
“Instead of chipping away at a home loan for several decades, the trick to getting out of debt comes down to discipline, creating a smart money management plan and making sure you stick to it. Getting your income working for you and not the banks is the key to debt reduction.”
Mr Parry said his top ten tips for getting out of debt in 2013 were:
1. Consolidate debt. Consolidate all existing ’bad debt’ such as credit cards, personal loans
and car loans into your home loan. Getting this debt onto a lower interest rate will help
ease your cash flow crisis and your debt will be paid off a lot quicker.
2. Make your money work for you, not the banks. Get your income banked directly into
your home loan account so that is starts working for you, with your savings counting
towards your loan so you pay less interest.
3. Keep up your repayments. Keep paying at your old interest rate when rates drop to save
big in the long run. If possible, you should never decrease your mortgage payments.
4. Automate your Money Management. Get your income automatically paid into your loan
from your payroll officer, don’t wait to pay extra with what money is left over at the end of
the month as there is usually very little to work with.
5. Don’t refinance onto another 30 year Term. Every time you refinance the 30 year clock
is reset and you are back at the start of another 30 year mortgage. Instead you should
refinance so that you keep the existing term left on your mortgage.
6. Put large lump sums towards your mortgage. Sums of money such as tax returns or
bonus payments can save years’ worth of interest on your loan. Even small lump sums
towards your mortgage will add up over the long run.
7. Think about your spending. Make higher repayments by cutting back on other
expenses. Small sacrifices, like making lunch instead of buying it or cutting back on
coffee, can lead to big savings in the long-term.
8. Set short term Financial Goals. Like everything, we get better results when we have a
plan in place. If you want to pay $12,000 off your home loan this year set the goal of
paying $1000 per month off the principal and monitor it regularly. Always reward yourself when you achieve the goal. 9. Cut up your credit card. If you can, get rid of your credit cards completely and switch to a
VISA DEBIT card. You think and spend differently with cash than you do with credit.
10. Live within your means. Set a weekly spending allowance and stick to it. If you can’t
afford something using cash, don’t buy it.