Why debt consolidation could help win business in 2023

 

Are you looking for ways to attract and retain customers but feel hampered by rising interest rates? The cashflow savings of debt consolidation may be your answer in 2023.

Australia’s rising interest rates show no sign of easing soon, according to Monash University Economics Lecturer Isaac Gross. This poses challenges if your customers think a lower rate is the only way to improve cashflow.

However, there are many more opportunities. Borrowers are increasingly seeking solutions to financial strain as rising rates take more money from the household budget. This is where debt consolidation can help.

Let’s look at the facts. Australians rushed to take personal loans from 2020 to mid-2022 as interest rates plunged following the coronavirus outbreak. This surge in borrowing is plain to see in the Australian Bureau of Statistics’ graph of new loan commitments. 

As we now know, interest rates did not stay low. A string of rate hikes from mid-2022 meant many borrowers had to allocate increasing amounts of money to mortgage repayments. A tool like debt consolidation can give them back the cashflow they used to have.

Naturally, the Smiths’ first inclination is to try and reduce their largest monthly outgoing, their mortgage, by asking for a lower interest rate. However, their broker explains their Resimac variable interest rate of 5.04% pa is already extremely competitive given their financial situation.

But he can still help to improve the Smiths’ cashflow by consolidating their debts.

This means extending the loan amount on the Smiths’ mortgage to $880,000 to immediately pay out the providers of the personal loan, credit card debt and car loan.

The personal loan, credit card debt and car loan carried interest charges of 12% pa or more. 

The Smiths can repay the remainder of these loans as part of their mortgage and at the Resimac rate of 5.04% pa.

There is more great news for the Smiths. Their total monthly repayment, all being paid at the lower mortgage interest rate, is lowered to $4,845.57.

This means the Smiths have $1,338.43 more to spend each month. This will help them save for their trip sooner.

While the consolidated debt will take longer to pay, the Smiths prefer the improved cashflow and chance to take their children overseas while they are young.

Consolidating their debts has also allowed them to own their car outright. They have cleared the other debts and are dealing with one finance company rather than four.

Speak to your BDM or relationship manager to find out more.

* All names and details are fictitious and are for illustrative purposes only.