Money tips to help you survive the silly season
Financial Planning | 30/11/2017 |
3 min read
Most of us know how expensive the holiday season can get. Travel, entertainment and gifts quickly add up and just when you think the spending has stopped, back-to-school expenses appear and new bills arrive.
While it may seem easy to borrow money to get through the expensive months, there are traps for the unwary. Here are some tips to help you borrow money this silly season.
Credit cards can be a great way to manage your monthly cash flow. They sit in your wallet providing instant access to relatively small amounts of money. You can pay them off whenever you want to and most have interest-free periods so if you do pay the money back quickly, it doesn’t cost you anything to borrow.
But if you’re not a good saver and don’t pay off your credit cards on time, the interest can add up fast. Also, be wary of introductory credit card offers that advertise low or zero balance transfer rates for a short term (particularly common this time of year), as the rate will almost certainly jump up.
Personal loans can be very useful for larger purchases of up to around $50,000, which most people could have difficulty paying off within a few months. The repayment periods are generally between one and seven years and offer a structured repayment process that requires automatic payments from a bank account, usually fortnightly or monthly.
Because of the regular automatic repayments, personal loans can be great for people who find it difficult to budget. ‘Unsecured’ personal loans, while more expensive, are useful for buying items a bank can use to recoup the loan, such as a holiday. If you do get a personal loan, make sure it lets you make extra payments, as some banks penalise borrowers for paying down their personal loan faster.
Home loan top ups
Another way to borrow larger amounts of money is through your home loan. You can do this either by applying for a home loan increase (a top up) or by withdrawing money you’ve already paid into your home loan (a redraw). The advantage of using your home loan is the money you’re borrowing is being repaid over a very long period and at a lower interest rate to a personal loan or credit card, which makes the repayments lower and the loan more affordable. However, if you pay off the loan over a long period, the total amount you pay in the long run could be much higher.
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