Are you living month to month hoping an unexpected bill doesn’t arrive?
Now, more so than ever, New Zealanders with mortgages are starting to feel the debt pinch. A lot of people are finding themselves trapped in a ‘debt cycle’ with a large mortgage AND borrowing on credit cards and personal loans to pay for their expenses.
In large part this is due to the cost of living, food, extracurricular activities, education costs and even family celebrations putting pressure on mortgage holders. And the thing is, costs are rising… but often your income is the same, forcing many people to live on credit.
Step One
Recognise and accept that without change, nothing will change
Getting out of the debt cycle means a need to recognise and understand your current position, spending habits and accept that you may need to make a change. You can use our budgeting tool to write down your expenses and get a good understanding of where you are positioned financially.If you are living with a high amount of debt it will impact you financially, but it also impacts your relationships, emotional and physical health. It can get to a point where the payments on your credit card and personal loans can become so large that they soak up most of your disposable income. This forces you to put more on the credit card to get through the end of the month. And so the downhill spiral begins.
Step Two
Manage your existing debt
For Nest Home Loans to present your situation to a lender for a mortgage or consolidation loan in preparation for a mortgage it helps to make sure all debt repayments are paid on time with zero arrears. If you’ve already completed this step, it’s time to continue to step 3. An easy way to pay your debts on time is to set up an automatic direct debit from your bank account five days prior to the repayment due date or when your income goes into your account. This means you will make all of the payments without thinking about it and make it easier for us to complete the next step.Step Three
Get Nest Home Loans to approach your lenders for a better deal
This may come as a surprise, but your home loan could be your number one tool to pull you out of your debt situation and take the stress out of your finances. This becomes especially powerful if you have a credit card balance or loans above $10,000.When Nest Home Loans approaches your existing lender to consolidate debt we can achieve four things:
- We can lower your total interest rate by paying down your unsecured debt.
- We can cancel your debt facilities to remove the mindset of “putting it on the credit card” effectively ending your debt cycle!
- Consolidate repayments into a single payment. This make it easier to keep track of your budgeting and means you won’t miss payments and incur extra bank fees.
- Increase your funds available to do the things you’ve wanted to do
If your existing lender is unable to offer you a lower, more competitive interest rate inclusive of your consolidated debt, then refinancing to an alternative lender may be the next best thing.
Step Four
Find an alternative lender who will offer you the most competitive terms
Refinancing to a new lender allows you to rewrite your current mortgage, plus consolidate debt with another lender, with the general objective to take control of your finances.The new lender pays out the current mortgage and your credit cards and loans. Nest Home Loans has access to multiple lenders and understands the products on offer. We are able to quickly and easily compare your loan interest rates to other lenders and mortgages in the market and present you with the best option suitable for your situation. This is a hugely valuable resource which requires a very minimal investment of your time.
What you will find is that we are able to negotiate you a great deal with our experience negotiating interest rates and mortgage terms.
Step Five
Keep your financial freedom
Now you have broken free of the debt cycle we need to make sure that we don’t fall back into it again!- Make sure that all your debt facilities and credit cards are cancelled.
- Redo your budget to make sure you are putting the extra funds you now have towards paying down your debts or saving up for your goals.
- Use your Nest Home Loans adviser to review your home loan every two years. It’s really important to continue having your money work hard for you.
