Debt Management

Credit can help you do many things: buy your dream home, get a new car or meet day-to-day expenses. In some cases, it may help to build your wealth faster by investing into property or shares.

It can be easy to borrow these days, which means its even easier to get into debt. Fees, charges and interest rates can make credit very expensive, especially if you borrow more than you can afford.

It is important your debt be managed and structured effectively to minimise borrowing costs.

The way debt is managed may depend on whether it is considered ‘efficient’ or ‘inefficient’.

Efficient debt qualifies for a tax deduction in relation to interest costs, whereas inefficient debt does not.

Inefficient debt (such as your home loan or personal loan) is often draining on your long-term wealth accumulation capacity when not managed properly. Wherever possible you should try to accelerate the repayment of your inefficient debt.

There are a number of strategies that can be effective in reducing inefficient debt. These include:

  • Using a redraw facility or loan offset account
  • Increasing regular repayments
  • Increasing payment frequency
  • Making additional lump sum payments
  • Utilising a credit card strategy effectively in conjunction with your loan
  • Consolidating debt
  • Debt recycling