Average saving: $1990 over 26 months … calculated by assuming that you pay the same amount required to clear your debt in 26 months on a 0 per cent card, on an 18 per cent card: $61 a month. You can crunch the numbers on your own potential saving on moneysmart.gov.au’s credit card calculator.
Your personal loan: The most common value of one or more personal loans across Australia is more difficult to ascertain, but $25,000 – usually at least partially for a car – is not atypical.
Here, Mozo says the average interest rate is 9.57 per cent while the best is way down at nearly half that much: 5.76 per cent (from Harmoney, a risk-based pricing loan – the better your credit score, the lower your rate).
Average saving: Assuming a five-year loan, $45 a month or $2700 over five years.
Your mortgage: This, as probably your biggest debt (but against your most likely biggest asset), is where you almost certainly stand to make the biggest savings.
The average variable rate for owner occupiers is 6.13 per cent, Mozo says, against the cheapest quality mortgage (with a real offset account) of 5.2 per cent (products in that interest rate vicinity are available from Bank of China, Up and Queensland Country Bank, with People’s Choice, Police Credit Union and Northern Inland Credit Union coming close).
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In case you didn’t clock that, there’s an equivalent of almost four rate cuts you could give yourself rather than waiting for them to be Reserve Bank-bestowed. And, indeed, it’s timely given the next official cash rate move still looks like being up (despite lower inflation last week).
What’s your potential saving as per the average home loan today nationally, which has forged scarily close to $700,000 at $694,000, on the latest lending statistics from the ABS? $388 a month, or $116,400 over 25 years.
But here’s the thing … if you can at all manage to keep your repayments the same after switching, then you will achieve mortgage-freedom not $116,400 more cheaply but for $215,155 less.
What’s more, you will discharge your loan four years early – at which point there will obviously be no monthly mortgage payments to pay. And remember, that’s for not outlaying a penny more than you are used to today.
This New Year, give that some thought.
Nicole Pedersen-McKinnon is author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, X and Instagram.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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