Times are tough but there are some things we can do to try and improve our financial situation. For starters, small and medium businesses struggling will be able to access cheaper funding after the federal government expanded the eligibility criteria for the SME Recovery Loan Scheme.
If you are unaware of what the scheme is it basically means the federal government will guarantee 80% of each loan in the scheme, and because of this, lenders can offer the loans “more cheaply and more freely” compared to ordinary business loans.
This version of the scheme allows SMEs dealing with the economic impacts of COVID with a turnover of less than $250 million will be able to access loans of up to $5 million over a term of up to 10 years.
Other key features of the SME Recovery Loan Scheme include:
- Lenders are allowed to offer borrowers a repayment holiday of up to 24 months.
- Loans can be used for a broad range of business purposes, including to support investment.
- Loans may be used to refinance the pre-existing debt of an eligible borrower, including debts from the SME Guarantee Scheme.
- Loans can be either unsecured or secured (excluding residential property).
It’s important to note, however, that the loans will only be available through participating lenders until 31 December 2021.
If you aren’t eligible for these kinds of schemes, then don’t worry debt consolidation might be able to help you. If you have more than one loan – be that a credit card, car loan, and/or a personal loan – you can help reduce the stress of juggling multiple debts, payment dates, and interest rates by rolling them into one easy-to-manage loan.
One common debt consolidation method is to take out a new personal loan and use the funds to pay off your other existing debts.
Now, if the interest rate on the new personal loan is lower than the rate on your existing debts (for example, a credit card with a 17.99% interest rate) this can help you pay less interest each month – not to mention avoid the nasty late payment fees that come with those kinds of cards.
And by rolling all your debts into one, you can get a clearer timeline of when you can be debt-free.
Debt consolidation can also make it easier for you to manage your household budget, as you only need to factor in repayments for one debt per month instead of many.
Another method people use for debt consolidation is rolling it into a refinanced home loan because mortgages offer comparatively low interest rates.
So if you’re really struggling with multiple debts right now – such as a car loan or a number of credit cards – consolidating your debts into your home loan will, in most cases, reduce your overall monthly repayments.
But a word of caution. While this option can reduce your monthly repayments now, debt consolidation through your mortgage can turn a short-term debt (like a personal loan) into a much longer-term debt.
Contact us at It’s Simple Finance if you have any questions or wish to make an enquiry.