Receiving tax refunds is a great help with your annual budget. This would mean having extra cash that can be used. You might think of using this for a planned vacation with your family or spend it to purchase that car or appliance you’ve been dreaming of. You may use your tax refunds to pay off one or two of your outstanding debts and loans.
You should consider the following key points to optimise your tax refunds:
Prioritise the debts with higher interest rates
Although you might think that paying off as much of your home’s mortgage with your tax refund is best, it might be better to prioritise other credit card debt or other personal loans that have higher interest rates.
Manage debt via debt consolidation plan
Debt consolidation is pooling a number of your different debts into one loan that has a lower overall interest rate. This enables you to enjoy savings on monthly repayments as you are paying one bill instead of two or more and will be dealing with only one lender. This savings may cut hundreds or even thousands of dollars from your overall interest bill, which is real peachy!
Add your tax refunds to your Home Loan Offset or Redraw Account
This will enable you to maintain access to your money. An offset account is like a normal transactional account that allows you to deposit and withdraw money as you would a standard account. Redraw account, on the other hand, is a facility that enables you to pay extra money off your loan and allows you to take this money back out if you need to. Both of these accounts aim to help you minimise the interest you pay for your home loan.
Still uncertain how to optimise your tax refunds?
Talk to us and we will be happy to assist you!