Consolidate your debts to reduce stress.

Consolidating multiple debts into a current mortgage could be a worthwhile exercise to get out of the multiple loan repayment maze.

It is not uncommon for one household to have multiple loans by way of mortgages, car loans, personal loans and credit cards. The repayments on these loans and credit cards fall due at various times of the month and in differing amounts.

Bearing in mind that interest rates on car loans, personal loans and credit cards are usually much higher than those of a home loan, it may seem sensible to consolidate all debts. Consolidation also means not having to negotiate the multiple repayments every month.

The advantages of consolidation are:
1. being able to pay off high-interest debts at the lower mortgage rate;
2. having one monthly repayment; and
3. the availability of additional disposable income.

However, consolidating debts is not as cut and dry as it sounds. It is important to bear in mind that:
1. it will increase the home loan debt and monthly repayments; and
2. other debts are being paid off over a longer period of time than originally intended.

Nevertheless, all is not lost. There is a smart money way to counteract this. By paying a portion of the additional disposable income into the mortgage, you can reduce the term of the loan and in turn this reduces the interest paid over the life of the loan. If you are unsure if debt consolidation will suit your personal situation, it may be wise to consult a professional to help you decide.