How to boost cashflow

Post GFC Banks have become much tighter when it comes to lending. Where they may have accepted the occasional missed payment they now take a much tougher stance. And instances with repeated missed payments even if just by a day could prevent you from obtaining further finance.  The bank's attitude is, "if you can't manage what you have how can you manage an increased commitment"?

Therefore it is important to look at how you are managing your debt and whether you have the most effective system in place. One area to consider is debt consolidation. If you are in a situation where you are juggling a number of debts - home loan, a couple of credit cards, personal etc - it can be very stressful and time consuming. And there's a good chance that you are likely to miss a payment or two.

Debt consolidation is the process of taking all your debts (credit card balances, overdrafts, store cards and so on) and consolidating it into one, low-interest loan. This offer a number of benefits:

·          It is simple and more manageable. Poor management of personal finance is one of the ways in which people get into trouble with debt.

·          Debt consolidation usually involves shifting higher costs debt onto a lower rate which generally improves cashflow. This improved cashflow allows you to pay off this debt faster.

·          It minimizes the risk of accumulating further debt. Poor cashflow management generally sees people turn to more debt as the solution. This just gets them in a debt spiral. Simplifying debt into a single target allows you to focus on decreasing rather than increasing debt.

Let's look at an example
Ben and Julie have a home loan of $240,000 with a rate of 7.11%. 2 credit cards totaling $30,000 both at 20%, and a car loan of $30,000 with repayments of $850 a month. Their total required monthly repayments are $3,365.

Through debt consolidation it was possible to get their entire debt including their home loan onto a lower rate of 6.47%. This brought their total monthly repayment down to $1,891 a month. An improvement in cash flow of $1,474 per month. Tipping those savings into their home loan would cut the term by 19 years and 10 months and save over $270,000 in interest.

So in the right circumstance debt consolidation can make a significant difference to your finances. And when combined with some of our other cashflow management systems it can assist to reduce personal debt.

Contact us for an informal chat if you would like to discuss safe and affordable strategies that can put you back in control by reducing personal debt.