Financial debt advisor

Debt management involves creating a plan that strategically reduces your debts, setting you on a path to financial stability. We start by reviewing your financial situation, including income, expenses, and existing debts. From there, we develop a personalised strategy to prioritise your debts, negotiate with creditors, and implement a payment plan that aligns with your goals.

Debt consolidation can be a smart way to reduce your overall interest rate and pay down debt sooner. Debt consolidation works by taking out a new loan at a lower rate to pay off a number of other loans you may have at higher rates.

For example, let's say you have a home valued at $1m and a loan against the home of $500k.  You also have 2 credit cards with a total of $20,000 owing on the cards. The credit cards are charging 15% per annum. You also have a car loan of $30,000 at a rate of 6%.

It may be possible to draw down a further $50,000 against your home to payoff (consolidate) the credit cards and car loan and instead of paying 15% or 6% on the debt, you reduce it down to a home loan rate under 3%.

High-interest credit card debt can quickly become overwhelming. Our personal debt advice provides strategies to tackle credit card debt effectively, including budgeting tips, balance transfers, and debt repayment plans. We help you create a manageable path to pay off your credit cards and improve your financial health.

Like many questions relating to financial advice, the short answer is: it depends.

Good advice always depends on your individual circumstances. However, it’s possible to educate yourself on the outcomes of each choice.

Conventional wisdom has usually said you should pay off your home as quickly as possible and then turn your attention to building a nest egg.

The main aspect to consider is the return you can get on investments in your super vs. the interest rate on your home loan. With home loan rates at record lows in recent years, it can often make more sense to get a 7%-8% return from money in your super, rather than repay your home loan which is effectively the same as earning 2 to 3% per year.      

If you do decide to invest in super rather than pay your home loan, it all comes down to planning. You may choose to prioritise investing in super for a period of 10 years. At the end of those ten years, you may then access your super and use some of this money to pay down the loan. If you plan correctly, you may be able to achieve both goals of building your super and repaying your debt — it's just the timing is different.

The right time to pay down debt will always depend on your personal situation.

There are three key factors to consider when assessing the merits of paying down debt: first, your comfort level with debt. Second, the interest rates on your debt. And third, the tax effectiveness of your debt.

Your comfort with debt is the most important factor. Regardless of how cheap the interest rates on debt may be, if your debt levels are keeping you up at night, then you should prioritise working to pay off debt.

The interest rates on your debt will be the second key factor in when or if you pay down debt. In recent years, the cost of debt has become cheaper. Therefore, it can make sense to invest your excess cash flow rather than prioritise paying down your debt. For example, a home loan debt can be as low as 2%, while the return on investing in shares can be as high as 8% per annum.  Paying down your home loan is the same as getting a 2% return on your money.  

The other key consideration is the tax effectiveness of your debt. It can make sense to ensure you pay down non-tax-deductible debt over tax-deductible debt. This can mean paying down the loan on your primary place of residence rather than your investment property.