Getting all your financial ducks in a row

From late bills to credit cards, overdrafts, automatic payments, direct debits, buy-now and pay-later deals, store cards, predatory pay-day loans, interest-free terms that expire too quickly, and a squeezed economy – it’s easy to fall behind on repayments and struggle to keep your head above water.

That’s why we chatted to Sam Hamilton, who’s been with MTF Finance for 12 years and heading up the MTF Finance Timaru branch since 2020. Sam’s seen a lot of change and helped many people “bring order to the chaos” – so we thought he’d be the right person to talk about debt consolidation.

What is debt consolidation?

Simply put, it means combining all your debts into one loan with better terms. Instead of wrestling with lots of smaller outgoings and fees, all the sources of debt are brought together in one loan that’s easier to control.

Sam calls it a “financial strategy, and a great tool to bring order to chaos.”

“Many people feel overwhelmed if they’ve got lots of debts to pay, regardless of the amount each month,” says Sam. “Debt consolidation can make it easier and give you the control you need.”

Common financial struggles

Debts can come from anywhere, and that makes it easy to end up with more than you’d like.

“Right now, there are many buy-now, pay-later deals that we’ve been consolidating,” says Sam. “They’re easy to get, and that can be a problem if you’re struggling with your money. It’s very convenient to just take what’s offered, even if it’s not the best choice – and people pay dearly for it!”

Deals from electronics retailers can also catch people out when the interest-free term ends – “especially if you’ve only made minimum repayments,” notes Sam. “And then when the term ends, you could face 25 percent interest.”

There’s a real risk of getting caught in those cycles. We can do better than that, which is why debt consolidation makes sense for many people.

How does it typically work?

The first thing is to book with a financial specialist. Together you’ll go over all the balances, interest rates, and bank statements to see the big picture of your income and expenses and what you can manage.

If consolidating your debt is an option, then you trade your loans for one simpler one that you pay off at a more achievable rate and timeline.

As Sam points out, “results can vary, so you need a personalised assessment to make sure it’ll work.”

Responsible lending

Everything from high-interest vehicle and personal loans to credit sale agreements and vet bills can be covered by debt consolidation. But interest-free loans or bills aren’t always worth adding to a consolidation loan since they’re less urgent and will add to your repayments.

This is what a personalised assessment will reveal, and why it’s a big part of responsible lending.

In making payments more manageable, repayment periods extend, which could mean more interest in the long term too. That’s a trade-off of streamlining the process, but it tends to make the budget easier.

Judgement-free assessments

MTF Finance has a bank statement retriever tool that pulls in data from the last 90 days of transactions and provides true metrics on your money. That way, you’ll be able to get an honest view of your finances - and importantly, going to see an advisor should be a judgement-free exercise. “We’re not here to critique your spending habits. Honesty is key if you want to get control of your debts” says Sam.

The terms of a consolidation loan will vary but can be matched to suit your financial routine. If you get paid fortnightly, then your loan repayment can come out on the same cycle so that it’s more predictable and easier to budget.

“One payment each pay cycle is easier to manage than being bombarded with bills,” adds Sam. “And ideally the interest rate on the new loan is less than that of all the other debts combined.”