New research has shown that more Aussies are relying on borrowing money as debt hits a record high. According to finder.com.au, borrowing money on credit cards & personal loans has reached over $101.4 billion.
Personal loans are growing faster than credit card debt, with personal loan debt now equaling $59.6 billion. Whereas credit card debt sits at $41.8 billion owed.
Michelle Hutchison, Money Expert at finder.com.au, believes a lot of this extra debt is from over spending over the summer and festive season.
“Australian households are often struggling with expenses at this time of year," she said.
“The best way to finance unexpected expenses or unmanageable debt takes careful consideration so that you don’t end up struggling even more down the track.
“It really depends on what you need the money for, your credit profile and your ability to pay it back over a set period of time,” said Mrs Hutchison.
Consumer Action Legal Centre chief executive Gerard Brody said that borrowing more money to repay household bills was usually a sign that people were close to serious financial trouble.
"Borrowing for these expenses can lead to significant financial problems. Credit cards especially can be a debt trap. The fact that you only have to pay a minimum monthly repayment means that many people can be paying very expensive interest rates for years," he said.
If you find that you are starting to rely on your credit card and personal loans too often, it's important to start rethinking your finances. Here are a few quick tips to consider that may help you organise your finances.
• Consolidate your debts by increasing your home loan to pay them out or by rolling them into a credit card or loan with a low interest rate will only work to save you money if you actually work to pay them off quickly.
• List all of your ongoing expenses and start the process of elimination. Start by looking at contracts that are easier to cancel such as gym memberships, paid TV and phone plans. Unlike other commitments such as personal, car and home loans, these contracts can usually be cancelled quickly, immediately releasing some financial pressure.
• Prioritise your bills. Start by choosing the debt with the highest interest rate and start putting any extra money towards paying it off.
• Speak to your financial adviser if you feel like you are under serious financial stress. They will be able to give personalised advice to suit your own situation.