How To Effectively Pay Off Debt

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Raffi Pailagian
Financial Planner / Managing Partner

This vLog discusses the key elements that need to be considered when looking at how to effectively pay off debt.

(00:00): What lessons have we learned from the GFC in terms of managing debt, that we can apply today in the COVID-19 economic environment?

(00:17): Hi, it’s Raffi from Manly Financial Services here. In 2007 consumer’s confidence was high and we were spending. People were tapping into the equity of their homes with the rising house prices and instead of buying a car, they’d buy a car and a boat. Property values were growing, wages were rising and taxes were falling. We felt like we were getting wealthier by the day and we were spending.

(00:37): In Australia total household debt had risen to over 150% of household income from 100% only from the start of the decade. The outcome of all this spending is the accumulation of debt in the form of larger mortgages and high interest rate debt such as credit cards.

(00:58): These high rate loans represent another leakage or wastage from our cash flow. Interest rates on these loans do not follow the trend of falling household mortgage rates and additional transaction costs and late payment fees add to the amount that’s wasted every day in these accounts. You’re working hard to generate your income, so why waste money in the form of fees and high interest?

What Can We Do About Our High Interest Rate Debt?

(01:44):  So what can we do about this high interest rate debt? Well, the first thing we can do is look to consolidate that debt. With mortgage rates at all time lows, it’s time to look at consolidating these high double digit interest rate credit card debts into your home loan and to set a plan to pay off the consolidated extra debt with additional repayments over the next 12 months.

Repayment Of Multiple Card Debts

(01:44): If you have multiple credit cards and can’t consolidate them into your mortgage, or don’t have a mortgage, then it’s important to pay additional amounts into the higher rate and higher debt cards first, as opposed to spending the additional repayment across all your credit cards.

(02:00): So if you have a budget of a thousand dollars a month that you want to spend on repaying credit cards, it’s important to not just break that up across your multiple credit cards, but to allocate a greater amount of funds to the higher debt cards and the higher rate cards and less to the others, until you can bring those debts down and then start spreading the repayment across the other cards.

Transfer Balance Deals

(02:24): Now you’ve noticed that we haven’t talked about transfer balance deals that the banks are providing at the moment. Now this is definitely something you can do, if you don’t have a low interest rate mortgage to transfer your debt into. And this involves transferring your credit card debt from a higher rate card to a lower rate card, usually with another bank or financial institution. It’s important when you do this, that you set a plan to repay that debt at the lower interest rate, as opposed to just holding onto it and increasing it over time, which we see happen quite often.

The Most Important Step!

(02:57): Once all your cards are paid off, it’s time to cut up any unnecessary, additional credit cards that you may have acquired over the years. I Hope you found this video informative and practical. If you did, please tick thumbs up and subscribe to our channel for future videos. And if you’d like some help, please visit our website at so you can connect with one of our advisors and start your journey to becoming debt-free. Thanks.

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