Tag: Financial Counseling Australia

Things To Do To Become Loan Free

Almost every person takes some form of loan in his or her life like credit card loan, home loan, car loan, etc. Of all the loans, home loan is the biggest debt that one takes in their lifetime. Many advocate keeping home loan for a longer period to take advantage of the tax rebates. The other loans, while they do not offer any tax concessions, are more about the convenience factor. In some cases, they may be even habitual, such as credit card loans.

However, any financially aware person will advise to get rid of these loans the earliest possible. For while they may facilitate purchase of the desired lifestyle, they come with hefty interest rates that drain your earnings in the end. There may be times when these loans can cause your emotional harm too. There is no feeling like being free financially. Here are a few things you can do to become loan free:

Pay off any debts other than the mortgage

If you have any loans other that your home loan, it makes sense to pay them off first. This is because they are unsecured loans and therefore, carry higher rates of interest. As things like car, clothes, electronics, etc. do not appreciate, they are considered bad debt. However, home loan is a good debt as it appreciates. The question is how to? In Australia, debt consolidation loans are offered by service providers, which come at lower rates of interest as compared to the unsecured loans. It also helps you to consolidate your loans into one account.

Stop spending more than you are earning

Once you have consolidated your loans, it is also important cultivate some financial discipline in your life. Start by budgeting your expense and capping them to limits. Do not spend more than you earn. Failing which, you will only find yourself opening new debt accounts beside your consolidated loan account. It is a vicious circle, from which you want to stay out.

Check the real interest rate on your mortgage

Once you have paid off your other loans, it is time to focus on your home loan. Start by checking the real interest rate that you are paying on your home loan. If you are in the tax bracket that allows you to avail the mortgage interest deduction, check to see the effective rate of interest that you are paying to the bank. If it is less than what you would make by investing money in the market, continue with your home loan. Else, accelerate your pace of repayment.

Seek Financial Help

If financial calculations are not your forte, or you are wondering how to pre-pay your home loan without affecting your disposable income greatly, seek help. In Australia, financial help can be availed for a fee from private counselors or from the Financial Counseling Australia.