November 21, 2018 | 03:51 AM

Get Out of Debt

27.11.2008John Symond's top 5 debt tips

Don't turn short-term debt into a long-term debt disaster

By Jill Fraser

Aussie Home Loans founder John Symonds knows a thing or two about lending and what not to do if you are deep in debt. FatCat asked Symonds for his top 5 tips on getting out of debt, or more importantly, what to do if you are in trouble.

"One of the worst things consumers can do is consolidate their ’bad money’ – credit cards, car loans etc. - and roll it into their home loan,” warns Symond.

“While this might save a couple of hundred dollars a month you could end up adding $50,000 in interest. Because what you’re doing is turning short-term bad debt into a 20-30 year facility at a lower rate and at the same time doubling or trebling the interest component,” he says.

Symond mentions one debt-ridden consumer who was poorly advised to roll her second-hand car repayments into her mortgage. “In 20 years' time she won’t even own the car and yet she’ll still be paying it off,” says Symond.

So here are Symond's top 5 tips:

Tip One: Don’t focus just on lowering monthly repayments. Take into consideration how much interest you will be paying over the long term. 

Tip Two: If manageable, try to keep up current mortgage repayments despite the rate cuts. If you must drop your mortgage repayments, do so by the smallest amount possible. Remember, the longer it takes to pay off your mortgage, the higher your interest bill overall.

Tip Three: Shift to fortnightly instead of monthly repayments. This works out at 26 payments per year and one full calendar month extra per annum.

Tip Four: Whenever possible find an extra $10 a fortnight for mortgage repayments. That’s going to add up to $20,000 to $30,000 in interest saving.

Tip Five: Do a financial health check yearly.

“It’s beyond me why people are so apathetic and still have credit cards that are charging 18% - 20% or even worse, store cards charging 28% - 30%,” says Symond.

“It’s not just a cut in interest rates that will save you money in the long run. It’s the way you conduct your home loan payments and financial matters.”

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