Nearly every Australian has or has had some form of debt in their lifestyle, ranging from having a mortgage for the family home or a credit card to help day-to-day expenses, all the way up to a margin loan to trade shares. With more and more pressure weighing down on the daily budget, here are some tips to get a wrangle on it.

Myth 1) Choose a credit card with interest-free periods to reduce interest costs.

This can be an effective way to get a handle on debt, but only if you are able to make the payments in the first place. Interest rates on credit cards tend to be higher than other forms of credit, so they must be used carefully, if at all. If you can pay the balance in full every payment period, you can avoid interest costs.

Myth 2) Consolidating debts into the home loan is cheaper.

A mortgage tends to have a lower rate than other secured loans, and drastically lower than credit cards. By consolidating different debts into the one loan, you may save on total interest expenses in the short term, at the cost of possibly extending the loan term – if not managed, you may end up paying more at the end of the mortgage and own your home much later than you anticipated.

Myth 3) Small adjustments won’t help.

Sometimes it is the smallest changes that make the biggest differences. Interest is usually calculated on a daily basis, regardless of the frequency it is charged to the loan. This means that making frequent payments over the course of the loan term can make drastic differences as you near the end and may find yourself paying it off much sooner.

Try making small changes to how you spend your day-to-day cash this festive period and avoid the New Years crunch.

If you require help with understanding what’s best for you, the team at Superannuation Advice Australia can help.  Contact us today!