Refinancing can be an opportunity to spring clean your financials. At Trigon, we can show you how to search for a more competitive rate,  pay out consumer debt such as personal loans and credit cards, and automate payments to reduce the time that you spend on your banking.

Many people avoid such strategies, believing that they are better off with separate facilities.

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The Myth

“If I roll my car loans and credit cards into my home loan, then I end up paying them off over 30 years and it will cost me more”

The Explanation

This is a common belief that results in many people persisting with expensive credit cards or personal loans when they don’t need to. Although your home loan may be on a 30 year term, it doesn’t mean that debt consolidation needs to extend over the same timeframe. Actually, if you keep on making the same repayments that you were making before, you will pay off your car or credit card much faster once it has been consolidated because the interest rate will most probably be much lower. Less interest means that more of your payment is taken off the principal component, thus paying off your loan faster.

The Danger

The main risk with consolidating these facilities is when you add them onto your home loan, and then re-establish new loans or credit cards. This can become a habit for some people, which eventually sees them in a much worse financial position. The key is to consolidate your debts and refrain from using consumer debt again. Of course a single, low limit credit card is useful for convenience, but should be paid off regularly within the interest-free period.

The Truth

If you consolidate debts and reinvest the savings, you will usually be much better off. If you waste to the savings on other things, then you will be worse off.