Debt consolidation loans surge amid post-holiday hangover

Debt consolidation loans are surging as cash-strapped shoppers battle to handle their Christmas credit score hangovers.

Market lender SocietyOne says January and February at all times see a spike in private loans, and its January figures had been a file for the month.

As much as 60 per cent of its private loans are for debt consolidation.

Reserve Financial institution of Australia knowledge exhibits private loans climbed greater than 12 per cent final 12 months to $167 billion, and debtors are being urged to look at their choices.

SocietyOne CEO Mark Jones mentioned it was good to see extra folks attempting to take management of their funds by consolidating debt at a decrease rate of interest.

“Debt consolidation is especially widespread early within the 12 months when folks have made resolutions to do away with their debt, have faculty charges arrive, or have merely discovered they might have overspent with the joy of the vacations,” he mentioned.

“It’s necessary to learn the positive print and test for additional month-to-month charges or early compensation charges which might undermine financial savings.”

Accounting agency RBK advisory director Shelley Davies works every day with shoppers combating debt and mentioned she had personally battled Christmas bank card stresses previously.

“I used to be positively in that class in my mid-twenties, spending on my bank cards as if the debt would simply one way or the other pay itself,” she mentioned.

“Now that I’m pushing 40 I positively know higher.

“The bank card lure is an absolute vicious cycle. Paying charges and excessive rates of interest throughout a number of playing cards isn’t just enormously financially damaging to many Australians, nevertheless it’s additionally mentally damaging too.”

Ms Davies mentioned consolidating debt was one of many first issues she mentioned with shoppers after discovering they’d a number of loans.

Finance dealer Financia’s managing director, Angelo Benedetti, mentioned his enterprise had been “inundated with purposes” for debt consolidation loans this month.

“It’s most likely a 30 per cent improve within the variety of purposes we now have seen in contrast with a typical month,” he mentioned.

Mr Benedetti mentioned 90 per cent of his debt consolidation loans had been by means of mortgages to benefit from low rates of interest, however warned that individuals wanted to take care of repayments at a excessive degree to cut back the debt shortly.

“Do your homework and ensure it’s the fitting factor for you in relation to your total curiosity value,” he mentioned.

“If you happen to stretch a $10,000 mortgage over 30 years you can be no higher off. Work out what it prices to pay it off over a two or three-year interval.”