How To Manage Higher Loan Repayments
Interest rates are rising as the Reserve Bank of Australia (RBA) looks to aggressively hike the official cash rate to help slow growing inflation.
For average borrowers, higher interest rates make it more difficult to meet mortgage payments and can eat into household budgets.
If you’re concerned about rising interest rates, there are a steps you can take to reduce your stress levels.
Scrutinise your spending
When costs are rising it’s very important to take a close look at where your money is going and prioritise what you really need to spend on.
Discretionary or luxury items might be an area you can cut down your expenses. Simple things like eating out or taking expensive holidays could be things to look at to save some money. Savings from these cuts can then be used in more important areas such as your mortgage.
Creating a budget and sticking to it is normally the best way to make sure you’re earning more than you’re spending each month.
Consolidate your debt
If you’ve got a number of different debts with varying interest rates, it could be worth looking at consolidating.
Consolidating your debt involves rolling the higher interest debts into one new loan with a lower interest rate. This can help you pay down your debts faster and deal with higher interest rates.
Another good option for those worried about higher interest repayments is to try and find more competitive rates. Working with a mortgage broker can help you compare your options and find different loan products that could potentially save you money.
There are normally introductory offers from lenders with competitive interest rates, as well as the option of different home loan products that could be suitable for your situation.
Look to downsize
If you’re really concerned about higher interest rates and being able to manage your mortgage, then you could even look at downsizing your property.
By finding a lower priced home, you could reduce the mortgage repayment to ensure it is more affordable.
Look for other forms of income
These days there are plenty of ways to earn extra money. Taking on some more work or a side job could be an effective way to improve your financial situation.
Interest rates rise and fall over time, so while they are in a phase where they are rising, it could be an opportunity to earn more income to help pay down the debt.