It’s important to use the best financial products and services for your personal situation. But since our personal situations have likely changed significantly over the past two years, how can you be confident that your previous choices are still up to date?
In general, it’s important to compare the cost you’ll pay for a financial product or service to the value it offers. If you could pay less, enjoy more benefits, or both, it may be worth jumping ship rather than paying the ‘loyalty tax’. Just keep in mind that there could also be fees or charges that could make switching less cost effective.
The dawn of a new year is as good a time as any to compare financial options, such as:
How’s your home loan’s interest rate? You may be able to refinance your mortgage and switch to a home loan with a lower interest rate, allowing you to pay off your property faster and save money on your loan.
Of course, if you’re currently on a fixed interest rate, you may not be able to switch to another lender just yet; at least not without shelling out for some significant break fees.
Remember that there’s more to a home loan than just its interest rate. You could also consider switching mortgage lenders if you want to access home loan features and benefits that may better suit your new situation, or if you’re unhappy with your current lender’s customer service.
A mortgage broker may also be able to help you work out the best options for your needs, and walk you through the switching process.
Personal loans and car loans
Refinancing a car loan may be an opportunity to upgrade your vehicle to a new model, depending on your financial situation. This could include switching from a petrol car to a hybrid or electric vehicle (EV), which could potentially help to reduce your future ongoing costs. Of course, the higher cost of these cars could mean borrowing more money and being in debt for longer, increasing how much interest you’ll pay over the long term, though there are green car loans to consider.
If you have multiple outstanding debts, such as smaller personal loans or credit cards, you may be able to refinance to a debt consolidation personal loan, combining multiple smaller debts into a single repayment, making things simpler and allowing you to make steady progress towards clearing your debt.
Another potential debt consolidation option could be adding your outstanding personal loans or credit cards onto your home loan. While this could allow you to pay less interest on these debts, it could make it take longer to pay off your mortgage, costing you more over the long term.
It’s all too easy to build up an impressive credit card debt over the holidays. And with credit card interest rates generally on the high side compared with other financial products, you could be slugged with significant interest charges if you don’t clear your balance within the card’s interest-free period.
If it looks like your credit card’s interest charges may start growing faster than you can realistically afford to pay off your balance, balance transfer credit cards are available, which may charge 0% interest for a limited time (e.g. 12 months), during which you can work on clearing your debt without worrying about interest charges adding to it.
Even if your credit card debt is under control, a new year can be a good time to ask yourself if your credit card still matches your spending habits. If you’re a big spender who regularly clears their balance, you may benefit from a rewards card that lets you earn points from your spending. But if you often have some money outstanding on your credit card, a low-rate no-frills option could be a more affordable choice, as it will offer a lower interest rate than many other options.
If you’ve been putting off looking into your super, the new year could be the time to rethink that. If you’ve previously consolidated your super into a single account, it may be worth looking at its past returns and investment options and thinking about whether it still matches your needs at your current stage in life. APRA’s list of the worst performing funds could be a useful indicator of whether your retirement plans could use a rethink.
Even if you don’t want to switch super funds, it could be worth checking whether your current super provider offers different investment options that could potentially better suit your needs. For example, a Growth investment option could potentially help increase your balance more quickly, while a Conservative investment option may take fewer risks, helping to protect the balance you’ve built up so far. Keep in mind that superannuation is a long-term investment, and it may be some time before you start seeing the results of any changes you make.
Savings accounts, term deposits and everyday bank accounts
It’s no secret that the last few years have been tough on Australia’s savers, with interest rates falling. These rates are likely going to continue to languish at these low points until the Reserve Bank of Australia (RBA) increases the national cash rate, which isn’t likely to occur until 2023 at least.
Until then, if you want to earn more than a token amount of interest on your saved wealth, you may need to shop around and compare your options for savings accounts and term deposits. Remember that you should also consider whether any fees or extra costs could affect the overall value of a savings product.
You could also consider investing your wealth elsewhere, such as shares or cryptocurrencies. While you may enjoy higher returns, these assets are also riskier, and aren’t guaranteed by the government like savings in an Authorised Deposit taking Institution (ADI).
Whether it’s home insurance, car insurance or health insurance, it’s always worth comparing policies and providers to make sure you’re getting the best deal for your situation. You may be able to enjoy similar levels of service, features, and other benefits while paying less for premiums if you look beyond your current insurance provider.
Remember that there’s more to insurance than its cost. While it may be tempting to lower your sum insured to help shave down your premiums, it may not be worth the risk of finding yourself underinsured when you really need it. Plus, some insurers may offer access to exclusive services and other benefits that could significantly increase the value of their policies to you.
With many Australians spending more time at home over the past couple of years, our energy consumption has changed. Depending on your living situation, you may find that a different electricity or gas retailer may be able to offer you a more affordable deal, such as by bundling your services.
Keep in mind that fees and charges may be involved if you choose to switch energy providers, such as if you were on a fixed term energy contract. It may be worth considering whether these extra costs could affect the value you may receive.
If you’re in the market to turn your home green by adding solar panels, batteries or other innovations, this could potentially help to shrink your home’s electricity costs. A green personal loan may be able to help you manage the upfront costs of purchasing and installing these green technologies.
Phone and internet
Much like your home’s energy, the way you use your phone and internet services may have changed significantly over the past couple of years. If you’re paying for features, benefits and services that you’re no longer using, or if you’re in the market for new phone and/or internet services, there may be alternative options out there.
You may need to pay cancellation fees and other costs when switching telco providers, such as when you break a fixed contract. That said, the introductory offers from some providers may help to offset some of these costs.