There are many ways to get out of debt and there are a lot of personal finance, debt consolidation and refinancing products on the market that make big promises about slashing your debt and saving you years in repayments but do they actually help you reduce debt faster?

Theirs is a common misconception that the only way to get out of debt is to consolidate it. This is fuelled by advertising claims like “get out of debt—consolidate and slash your repayments!”

Consolidating your debt is just one strategy. It can work well in some circumstances, but it’s not always the best and only solution for everybody.  There’s more than one way to get out of debt. That’s why it’s important that you understand and consider your options before making a decision, seek expert advice and build a debt reduction plan that fits you best is the key.

Securing a loan with a lower interest rate that consolidates your debts may be a good option for you as the debt consolidation loan should lower your overall cost of repayments by combining your high interest rate loans (credit cards, car loans etc.) into one loan that has a lower repayment. The new loan should streamline your payments and improve your cash flow to help you make extra repayments that will help you pay off your debt faster.

Most lenders only offer debt consolidation loans to borrowers that have real estate equity as security. It is also known as property refinancing, where equity in a property can be used to pay off credit card and consumer debts. It sounds straight-forward – you pay off your consumer debt, consolidate your high-interest loans into one payment, and have more money left over at the end of the month.

Unfortunately, it’s not always that easy. Consolidating your debts into a lower interest rate loan can certainly help your household budget in the short-term by freeing up cash flow. But what you do with the cash flow is the key.

You should also consider the longer-term opportunities associated with improving your cash flow, such as, being able to invest part of the extra cash flow into capital growth assets, such as an investment property that could be part of your debt reduction plan or perhaps using the extra cash flow to salary sacrifice and boost your superannuation and reduce your personal tax.

Debt consolidation loans are not for everyone as they can be difficult to qualify for. People who are already behind in payments or have defaults on their credit file may not be eligible. There are of course companies that specialise in lending to people with poor credit histories, however those loans usually attract higher than average interest charges which can make the repayments unaffordable and there for defeats the purpose.

Unfortunately, when it comes to paying off debt faster, there’s no magic wand or one-size-fits-all solution. We don’t believe in quick fixes – we want to begin to relieve your financial stress and get you back on track in a way that suits your situation and priorities. We do that by thoroughly examining your alternatives and designing a tailor-made solution that meets your needs.

The first step is a free debt reduction consultation where we’ll analyse your situation in detail. This will include a close examination of your debts, other expenses, sources of income and, of course, a clear understanding of your financial objectives. Even if you decide not to continue with Results Home Loans, a blue print of your debt reduction plan we design for you is yours to keep for free.

Unlike companies that specialise solely in debt consolidation, we explore your options. Our friendly staff will explain everything in simple, easy to understand language. No question or situation is too big or too small for us. We’re here to help.

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