Debt consolidation advice & Market update


Debt Consolidation:

I’m often astounded as to the amount of interest some of the Hire Purchase, Credit Card and Car Loan companies charge my clients.  I have seen rates as high as 27%.  After Christmas I am sure many of us have taken out some debt. Therefore I will try and deal with this wealth restricting dilemma in this month’s newsletter.

Benefits:

  1. By consolidating debt, it is easier to manage debt repayments with one single payment.
  2. Often, if you get good advice, the interest rate you will pay would be lower and therefore save you money.
  3. By having one loan you have less account fees to pay.
  4. With lower interest payments, if you keep your repayments the same, you can pay your debt off much quicker.


Risks:

  1. You need to ensure, once you have consolidated your debt, that you don’t acquire new debt.
  2. In most cases you pay higher interest for unsecured debt than secured debt, which allows for lower interest rate payments. Be aware, if you move from unsecured to secured debt, that you understand the ramifications.
  3. Make sure the debt consolidation loan period is shorter or the same period as your existing debt. It is not a good idea, for example, to refinance $20,000 worth of car loans structured over 5 years, at 17%, to a mortgage loan at 4.5% but then structure the mortgage over 20years. This would cause you to pay much more in interest even though the interest rate is lower.


Conclusion:

If you acquire debt, ask what the interest rate is and shop around to ensure you get the lowest interest rate possible. You can do a top-up on a mortgage to consolidate debt, but ensure the top-up is over a short period and be aware that the debt would be secured over your home. Naturally, I can help with that. Just give me a call.

Did you know, we also do asset finance?  Cars, trucks, diggers etc. Thus, if you would like good, ethical advice, along with market leading interest rates, give us a call.

Market update:

We’ve been very busy during the month of February. It seems the lull  leading up to the elections and Christmas are over and people are getting on with life. Interest rates are low, but the feedback from the market is that people are paying sensible prices rather than over inflated prices.

Bright-line test:

The government has confirmed their election promise to move the bright-line test from the current 2 years to 5 years.  Effective for properties acquired after the date of Royal Assent (this is likely to take effect in March of 2018) Therefore if you want to avoid being caught in the extended period, you need to purchase or enter into a contract quickly. Note: this does not apply to your owner occupied property.


Essentially the rule allows the IRD to tax profit made on non-owner-occupied properties if they are sold within 5 years.