Australian debt is on the rise and there is no sign of it slowing down. This has been caused by more Australians taking out bigger home loans and credit cards to meet loan payments. In order to make a comfortable living people find themselves loaning money to keep themselves afloat.
This has led to a national debt of $31,627,035,870 from credit cards alone. According to the Australian Bureau of Statistics Household Income, the average amount of debt that households have doubled from $94,100 to $168,600 in 2015-2016. It comes as no surprise when people try to find alternative ways to fund their lives and ease the brunt of debt.
Australians resort to alternatives
People now opt for personal loans with low interest rates to take care of purchases such as cars, holidays or other consumer items. Personal loans only account for 3.1% of Australians household debt.
Personal loans are now becoming a popular option among Australians. Research by Aussie Home Loans points out that 58% of its customers use personal loans to consolidate their credit card debt and other loans.
Peer-to-peer lending has also been on the rise due to its competitive rates that lenders offer with the average loan of $20,666. Australians who usually go for this method are usually looking for ways to reduce that they are paying on other debts.
To consolidate or not to consolidate?
Consolidating debt could work for some people due to the low interest rates and reduction in fee payments that you will pay, but it may be a temporary fix for others. It could work for you if you are struggling to manage the various debt that you currently have, especially if there is more than three.
To know if you are getting the best deal by consolidating your debt it is important that you compare interest rates, fees and charges that come with it. It has to be lower than what you are paying for each debt you are consolidating. Check if the features are suitable for your current financial situation before you lose more money.
Check for hidden fees
The low interest rate and reduction in monthly payment that come with taking out a personal loan to consolidate your debt might leave you with a sigh of relief, but there is one more thing you should check.
You should ask about the hidden fees that come with it to save you any nasty surprises up ahead. Fees can include:
- Application fees – Your lender could charge you upfront fees to cover the cost of administrative fees and running credit checks to see if you are eligible for a loan.
- Ongoing fees – You could be charged a small fee of $10 a month. Depending on how long that loan period is, this small number can eventually add up to something big if it’s spread over a period of 7 years.
You can save yourself the financial woes by simply asking about the hidden fees and comparing loans. It’s advisable that you be realistic about how much you need in order not to dig yourself deeper into debt. Furthermore, seeking debt counselling can help you map out a financial future that doesn’t see you swimming in debt.