Aussie borrowers have taken on $86.3 billion more debt in the past year, but current research reveals Australians are attempting to gain some control of their debts by using savings to pay down credit cards and personal loans as well as mortgages.
People would rather pay out current debts before putting any savings together. This certainly makes sense.
According to data provided by the RBA, Australian consumers have paid out $20.5 billion off their credit card balances in June 2010.
The ING Direct index found 48 per cent of homeowners making extra repayments on their mortgage, and 3 per cent struggling to meet repayments.
Currently Australia’s median mortgage balance is $175,509, down from $177,259 in the first three months of 2010. The median card debt per Australian household has gone down from $1802 to $1673.
Half (53 per cent) of households have less than $17,000 in savings and 17 per cent have no savings at all. The cash squeeze isn’t limited to low-income households, with 11 per cent of households earning $100,000 or more annually having no personal savings.
Clearly people have realized that they need to be careful with taking on debt which they are not able to service and have commenced to slowly pay out existing debts from savings.
Borrowers who have excessive non tax-deductible debts, such as credit cards or a home mortgage, should pay them off as soon as possible.
Borrowers with a large amount of debt should review available methods of debt reduction including consolidating various unsecured debts with a higher rate of interest into their mortgage.