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If you're drowning in debt, it's time to get your finances into gear.
If you're drowning in debt, it's time to get your finances into gear. SUPPLIED

How to ditch your debt

AUSTRALIANS are getting better at flexing their frugality with credit card debt plummeting to a 10-year low.

Reserve Bank of Australia data revealed while there was still a hefty $51.4 billion owing on credit, Australian credit card balances accruing interest have dropped to $31.4billion - the lowest level since August 2008. According to the ABS, there are more than 70% of households that have some type of debt.

Despite the flicker of optimism, debt is still debt and Savvy CEO Bill Tsouvalas said getting your finances sorted to ensure you were paying them off in the most efficient way was vital, with consolidation the first step.

"Debt consolidation works for people who are looking for ways to reduce the interest rate and fees by combining all their loans into one," Mr Tsouvalas said.

"It is one of the most efficient ways to dig yourself out of debt. You also make the process easier by having one loan repayment to worry about rather than multiple."

He said a personal loan could be the "saving grace" to help get your debt into one place.

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Consolidating your debt into a personal loan could be the best option to get your debts under control.

"It comes down to the interest rate and if you're putting a holiday on a credit card for example and you're not able to pay it back within 30, 60 or 90 days, your interest rate could be up around 17+%, whereas an interest rate on a personal loan may only be 11-12%," Mr Tsouvalas said.

"It is best to look at personal loans when a consumer has potentially two or three maxed-out credit cards and they're struggling to keep up with repayments or can only make the minimum repayments and there's no way of contributing more based on their income." 

Finding a loan that works with your circumstances was the key to getting back on the road to financial freedom.

"People are not the same and how we choose to use our money differs from person to person," Mr Tsouvalas said.

"That is why it is important to find a loan that matches your needs.

"The best way to make the most of any personal loan is to compare them and see if the features are suitable for your finances.

"There are also financial advisors who will help steer you in the right direction towards something that will work for you."