When speaking to clients about their finances, we often discuss strategies for effective debt management. A recent study found that Australian Household Debt to Income levels, have tripled since 1990. Australians are spending more of their income to service their debts than ever before. This is a concern given we have a historically low RBA cash rate.

Our record borrowings don't end at home loans. Aussies are also racking up substantial debt on their credit cards and personal loans. It is not uncommon for individuals to have total borrowings which are a combination of more than one type of debt. If you have any debt at all, no matter why or how you borrowed, it's always a good idea to make extra loan repayments.

Why Are Extra Loan Payments Always a Good Idea?

Every dollar you owe on your debts is costing you monthly interest. It could be as little as 4.17% on a home loan, or as high as 30% on a credit card. Making extra payments gets you out of debt faster and saves you money. This is an opinion shared by ASIC's MoneySmart

Thanks to the impact of compound interest, any extra money you pay off your debt today, will continue to save you interest for the remaining life of your loan. Extra loan repayments are beneficial for two reasons: