How to Get Out of Debt NZ: 5 Tips to Manage Your Debt
Debt is something many people experience at some point in their lives and Kiwis are no exception. 89% of New Zealand household debt is property debt, although credit cards, medical bills and personal loans are other sources of NZ debt, too. No matter how you get into the debt, it’s important to recognise key steps to get out of debt. The independent financial advisers and mortgage brokers at Mortgage Masters have a few tips on debt management and how to put yourself in the most financially secure position possible.
Pay Off Bad Debts
One of the top recommendations for managing debts is to pay off bad debts like credit cards and personal loans as a matter of priority. By paying down this NZ debt as soon as possible, you can avoid high interest payments and improve your position. There are two approaches to think about: snowball and avalanche. Snowball is when you pay off the smallest outstanding loan first, which can help motivate you. Avalanche is when you focus on the debt with the highest interest rate first and keep going from there.
Refinance NZ Home Loans
Whether you have one family home or several investment properties, smart debt management is your ticket to eventually living debt free without declaring bankruptcy in NZ. Refinancing is one possibility, as you can see if there are better deals out there for your home loan. A trusted mortgage broker can review your refinancing options and see if there are mortgage lenders with better rates and terms than you have currently.
How to Increase Credit Score NZ
Your credit history is one of the first things banks look at when reviewing a loan application, and a poor credit file will raise red flags and may result in a rejection. Once you know how to increase credit score NZ, you have a better chance of getting the funds you need to buy your dream home. You can improve your credit by paying bills on time, paying off outstanding debts and not applying for new credit until you are in a better position. Try to keep your credit card balance low, too.
NZ Debt Consolidation
Another option for debt management is consolidation, a worthwhile consideration before declaring bankruptcy in NZ. Debt consolidation is when all your debts are combined into one personal loan, so you can borrow the money to pay them off and then have one payment to make, preferably at a lower interest rate to help you get out faster. Rolling several debts into a single loan often saves on interest and is easier to budget for, helping you become debt free faster. You still must pay off the debt, so this process takes time and requires financial discipline.
Use a Budget to Get Out of Debt
Finally, paying down the debt as much as you can is easier when you have a budget you can stick to. Make a list of your NZ debt, assets and predicted income. Look for areas you can cut back in the short term to improve your chances of one day living debt free. This is an important aspect of debt management that not only helps you pay off existing debt but also helps to avoid getting into a deeper hole with more bad debt. You may want to speak to a reputable financial adviser who can help you through this process.
Discuss More Debt Management Strategies with Trusted Auckland Advisers
We hope you feel more confident knowing how to get out of debt NZ after reading our guide. Mortgage Masters is here to help with independent financial advice on debt management strategies that will bring you closer to your goals, such as buying a new home. Check out all our financial services and contact us today to discuss your financial situation in more detail.