Home Loan

7 Ways to Improve Your Cashflow by Adjusting Your Loan

CEO Finance 360 Degrees
Feeling the pinch? Learn home you can improve your cash flow just by tweaking your home loan.

Despite our best intentions, life does not always go to plan. Sometimes unexpected life events, career disruptions, or sudden necessary purchases are often unavoidable and can place strain on your cashflow.

If you do suddenly find yourself in a financial bind, it is good to know that the banks are understanding. In fact, they look favorably upon those who take the initiative and seek help before falling behind on repayments.

In most cases, your bank can accommodate short-term adjustments to your repayment schedule and let you can get back on your feet. After all, it is in the bank's best interest to make sure you return to a good financial standing and can repay your loan in full.

There are three common options a bank may provide.

Use Your Redraw Facility

If you have been making any extra repayments you will be ahead on your repayments, providing you a buffer. You can reduce your regular repayments or pause them for a little while without hurting your reputation with your bank.

Apply For a Hardship Variation

Even if you are not ahead on your repayments, you can still ask your bank for some leniency. They may be able to pause your interest for a while, meaning you only pay the principal component, or you can ask to have your payments temporarily reduced.

Repayment Holiday:

If the situation is very dire, your bank may even be able to offer you a3 to 6-month repayment holiday.  This is where the bank removes the need to make repayments for that period, and the missed interest repayments are added back onto the value of the loan.

Although these are all great options to have available to you, however, it is best to avoid approaching murky financial waters altogether. That is why it pays to be aware of the best finance deals in the market. Being pro-active and refinancing to a better deal could help you avoid financial stress.

There are several ways in which refinancing can help place you in a stronger cash flow position:

Extend Your Loan Term

By extending your loan term your weekly repayments will reduce as you will be repaying your loan over a longer period. While this leaves you with more money to spend week to week, it will cost you more in the long run as you will pay more interest over the life of your loan.

Access a Lower Interest Rate:

The economy, real estate, and finance market is always moving. Recently there has been a steady downward trend in interest rates and an upward trend in property prices. That means you will likely have a better loan to value ratio on your property than when you first financed your property. It’s likely that you can now access a better interest rate and loan package.

Switch To Interest-Only Repayments:

Refinancing a loan may allow you to switch to interest-only repayments for a period of time. This can potentially free up several hundred dollars a week of cashflow.

Consolidate Your Debts:

If you have taken out personal loans for significant purchases you are likely paying a high-interest rate on these. By refinancing you may be able to consolidate all your debt sunder your home loan and save hundreds of dollars a month in unnecessary interest payments.

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