Useful information about financial products and debt management
This is Australian Securities and Investment Commission's (ASIC) website that provides free and independent information and smart tips about borrowing, credit, debt management, potential scams and other topics.
Here you can find many tools and calculators such as budget planer, mortgage calculator, personal loan calculator and other useful tools that can help you manage your finances and achieve your financial goals.
If you are in serious debt and experience legal problems you may find yourself in situation where you can not afford a private solicitor. Here you can seek for free legal advise offered by community legal centres and Legal Aid agencies.
If you experience money problems you can receive free financial counseling that can help you solve your financial problems. Financial counselling is a safe way to deal with your money problems as your personal details will be kept confidential.
Here you can find general information and smart borrowing tips about personal loans, credit cards, home loans and other loan types.
If you wish to check whether certain money lender or other financial institution is registered and licensed to provide financial services your can visit ASICS's profesional register.
Do you really need a loan today? This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.
What is debt consolidation loan?
If you have more than one existing debts you can apply for debt consolidation loan and transfer all money owed into one loan. You will still, of course, have to pay back all the money owed, but this way you may be able to have more manageable monthly repayment and pay lover rate of interest.
Essentially you can combine several loans into a single one, for example if you have $1,000 credit card debt and $3,000 personal loan debt, you can apply for $4.000 debt consolidation loan. Main benefit of consolidation loan is that you will have make only one repayment and no longer have to deal with different rates of interest and fees.
What debt can be consolidated?
- Personal loans;
- Credit cards;
- Store/charge cards;
- Other debts such as debts to utility companies.
Benefits of consolidation loan
- Reduced monthly payments: Combining several loans into one with manageable payments and lower interest rate may help you reduce your outgoings and even help you to save some money.
- Improving your credit rating: If you are able to make the repayments of your loan without accruing further debt it will most likely seen as a positive impact on your credit score.
- You can avoid bankruptcy: If you are struggling to make payments to a several lenders and you feel like you may have to apply for bankruptcy debt consolidation may help you get back on track.
Risks of consolidation loan
- Losing your home. If you decide to turn all your unsecured debts such as personal loan or credit card debts into a debt that is secured by using such asset as your home, keep in mind that if you fail to make payments to your new loan you could lose your home.
- Fees and charges. Before you agree to a consolidations loan make sure that there are no hidden fees and charges that may make your new loan very expensive and potentially lead to more increased debt.
Consolidation loan could be a good fit for you if:
- You are struggling with multiple monthly repayments. Consolidation loan will make your debt more manageable and you will have to make only single one payment.
- You have large amount of debt. consolidation loan may help you get back on track and regain control of your financial situation.
What to consider before applying for debt consolidation loan?
- Affordability. Make sure that you will be able to make the monthly payments.
- Fees and charges. Make sure that you know what additional fees and charges will be associated with your consolidation loan as well as make sure that there are no hidden fees and charges that you might have to pay.
- Make sure that the lender is licensed. Search ASIC Connect's Professional Registers to check your credit provider has been licensed or you can phone ASIC's Infoline on 1300 300 630.
- Compare your options.Compare several debt consolidation offers to make sure you apply for the best available loan for you.
- Get free debt help.if you experience money problems, feel free to contact a financial counsellor, it's confidential and free of charge. For more information call financial counselling hotline 18000 007 007 or visit www.moneysmart.gov.au.
To apply for a consolidation loan you must:
- be at least 18 years old;
- have a regular income;
- have a good credit rating;
- be able to afford loan repayments.
Paperwork you may have to provide
- Proof of income - payslip, tax return report etc.
- Information about your current expenses - for example, bills, rent, other loans etc.
- Copy of your bank statement that shows your savings and other made repayments such as credit cards.
- Passport or drivers licence.
Possible fees and charges associated with your loan
- Establishment fee. Some lenders may ask you to pay this fees when setting up your loan.
- Monthly loan administration fee. Some lenders may ask you to pay monthly loan administration fee.
- Early loan repayment fee. You may be asked to pay this fee if you decide to pay-out your loan early. This fee is calculated according to how much you still owe to your lender and for how long.
- Late payment charges. If you miss a payment you usually have to pay late payment charge, so make sure you never miss a payment to avoid extra charges, also please note that this can also affect your credit score, which can make it harder to borrow money in the future.
- Enforcement expenses. If you don't pay back your loan, your lender can go to court to recover the owed money, in such cases you will be asked to cover these expenses.
Don't accept first loan you're offered, compare various lenders to make sure you get the best possible loan offer!
Before you borrow
Before you borrow money you should ask yourself whether you really need to spend the money and whether you can afford to pay back the money you're planning to borrow. Before borrowing ask yourself:
- Can the purchase wait until I can afford it without taking a loan?
- If the purchase is urgent is there another way I can get it? For example, ask employer for money advance, borrowing from family or friends.
- If the purchase is not urgent can I save up money?
Annual Percentage Rate (APR)
Annual Percentage Rate represents an annual cost (in %) of borrowing. The APR takes factors such as interest rate and certain other fees and charges into account. In order to make it easier for you to compare one loan to other similar loans, lenders are required to tell you their APR before you sign an agreement.
|Lender A offers
|3000 AUD for 360 days
with an APR of 13.4 %
|Lender B offers
|3000 AUD for 360 days
with an APR of 19.9 %
As it shows, in the scenario above, borrowing from Lender A would be a better idea, because you would get the same amount of money for the same term, but each month you would pay less interest.
Borrowing costs and fees
- Establishment fee: some lenders may ask you to pay this fees when setting up your loan, this fee can't be more than 20% of the loan amount.
- Monthly loan administration fee: some lenders may ask you to pay monthly loan administration fee, however it can't me more than 4% of the loan amount.
- Early loan repayment fee: You may be asked to pay this fee if you decide to pay-out your loan early. This fee is calculated according to how much you still owe to your lender and for how long.
- Late payment charges: if you miss a payment you usually have to pay late payment charge, so make sure you never miss a payment to avoid extra charges, also please note that this can also affect your credit score, which can make it harder to borrow money in the future.
- Enforcement expenses: if you don't pay back your loan, your lender can go to court to recover the owed money, in such cases you will be asked to cover these expenses.
If you're not able to pay back loan on time
- Loan extension: If you realize that you will not be able to repay the loan on time, there is a service of loan repayment period extension, which is offered by many companies for an additional cost. Every credit company sets the fee for the service of extending repayment period itself.
- Credit holidays: the delay of loan payments for a certain amount of time is called credit holidays. Credit holidays are available in some cases, such as a temporary loss of working ability or loss of job. In most cases credit holidays are granted for a period from one month to one year.
- Seek for help: if you experience money problems, feel free to contact a financial counsellor, it's confidential and free of charge. For more information call financial counselling hotline 18000 007 007 or visit www.moneysmart.gov.au.
Choose the shortest loan term you can afford. Longer-term loans might seem appealing at first as there are lower monthly repayments, however it may turn out that the total repayment is higher. If affordable it's better to take a loan for shorter period of time and pay back higher amount of money each month.
Before you borrow
check if your lender is licensed:
To make sure credit provider is licensed, you can check ASIC Profession Register.
Which is the best place to apply for a loan?
There are quite a lot of loan companies. We recommend you refrain from cooperating with companies that provide dubious service or companies with bad customer reviews. On our site you will find reliable companies that have been working in the field of crediting for a long time.
MoneyGuru24 is not a bank, lender, broker or product issuer. MoneyGuru24 is not owned by a financial institution but is an independent company owned by private shareholders. All information provided on MoneyGuru24 has general and informative nature. Although MoneyGuru24 covers wide range of loan products and providers, keep in mind that those are not the only options available in the market and may not be the best fit for you. We do not consider your personal circumstances and financial situation and we are not recommending any particular products. If you choose to apply for a loan product through MoneyGuru24 website you will be dealing directly with the loan provider not with MoneyGuru24. It is recommended for you to read all relevant documentation given by the loan provider before accepting any financial product offer.