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Consolidate personal loan with homeloan?
11 replies to this topic
Posted 05 December 2012 - 09:09 PM
After some advice. We have a personal loan - I think there's about $11k left to pay (over 4 years - nearly finished our first year). We are currently paying $105 per week, paying at this rate means it will be paid off in just over 2 years. We are struggling to pay this as we seem to have more outgoing than incoming.
I'm wondering if we should consider consolidating into the mortgage. I know this isn't the ideal situation, as it means we'll end up paying a lot more in interest over the life of the mortgage, but I don't know if we are going to manage - I feel it's the only thing we can do to give us some reprieve. Saving that $105 per week and putting into paying something else would really help us.
Would love to hear your ideas / advice.
Posted 05 December 2012 - 09:14 PM
We did it in that situation. In our case we're making the minimum repayments until I'm back to my usual work schedule next year and then we'll make extra repayments to pay that amount off in the same period we would have otherwise, but with the lower interest rate of the mortgage.
Posted 05 December 2012 - 09:19 PM
I'm no expert, but I personally would consolidate it, for sure, as the interest rate is usually much lower on a home loan. Then I'd start paying maybe $25-50/wk extra on the mortgage to help reduce that added amount. This would free up half the money you're paying out now and pay the rest off the 11k at a lower interest rate.
Posted 05 December 2012 - 09:23 PM
Yes that in your case, consolidate. As soon as you are financially better, pay MUCH MORE into the mortgage so that eventually the disadvantages of consolidating will dissipate.
Posted 11 December 2012 - 02:57 PM
I would definitely consolidate to get a lower interest rate, even if you don't pay $105 could you put something towards it?
It wouldn't actually cost you $105 a week as the interest component would be lower.
Posted 11 December 2012 - 03:13 PM
As long as you realise that if you just add it to the mortgage balance and pay it off over 20+ years (or whatever) the interest cost will be much higher. What interest rate is the PL compared to the mortgage?
Posted 11 December 2012 - 03:27 PM
If you can consolidate with your mortgage (presumably lower rate) AND keep up that level of extra repayment (but now directed at your mortgage instead of your personal loan), then it's a great idea, and would save you money in the long run. That's an 'if'. If you just spend the money that would have gone towards that payment, then it will end up costing you.
Posted 11 December 2012 - 03:30 PM
It would depend on the interest rate of your personal loan. We did it for mine when we got our mortgage but it was a 7 year loan (I think I was 2 years into it) with an interest rate more then 10% more then the homeloan we were also getting the loan which was about 50% of the purchase price so our payments were very low to begin with on the loan. I think the rule of thumb is $10K = $100 a month to your mortgage it might be less now because interest rates are good.
Do a few calcs and see which option has you paying more out in interest. If you decrease what you are paying now to the minimum it might be you are not that much more disadvanataged. It might be that you end up saving a bundle on interest by adding it to your mortgage. IT would depend on the interest rates ofthe PL and the mortgage and the amount of the mortgage.
Also you will have to qualify for the increase amount, when we went through this (we added about $10K within the first year of our loan) we had to actually have a whole new loan contract drawn up and payout the original loan. But this was probably due to not having equity or whatever in the actual loan.
Posted 11 December 2012 - 05:35 PM
From your OP, it sounds as if you're paying over the minimum amount. What would be the impact on your finances if you dropped the payment amount and let it run for the full 4 years?
Posted 11 December 2012 - 05:44 PM
Look at getting a 'top up' loan on your mortgage. It will be at your variable interest rate but is treated separately from your mortgage. You pay it separately so you can control how quickly you pay it off, and it would have a redraw facility which you would not need to use if you don't want to. Speak to your bank and see what options you have, and the costs for each option.
Posted 11 December 2012 - 08:33 PM
Thanks so much for your replies.
I think I have decided to suck it up and keep paying it off. I really don't want to pay out even more than I am now, which is what will happen if I pay it off over the life of my mortgage. We have a small amount of debt (less than 2k) I would like to pay off first, then I think I will concentrate on this loan and pay it down as fast as I can.
ETA - our tight position at the moment is due to extra expenses and Christmas - and not budgeting appropriately. I know this is short term, so I will continue to plug away at it!
Edited by *JAC*, 11 December 2012 - 08:34 PM.
Posted 11 December 2012 - 09:15 PM
You could see if you could consolidate the other loan in a 0% interest credit card? Or a low interest credit card. You have to be disciplined to pay it off in the time they allocate though otherwise you will end up paying high interest.
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