Ever felt overwhelmed by multiple debts scattered across different banks in Israel? You’re not alone—many Israelis juggle debts without realizing they’re paying way more interest than necessary. But here’s the good news: There’s a smart strategy called debt consolidation that can dramatically reduce your repayments, save you tens of thousands of shekels, and even simplify your finances in the process.
Intrigued? Let’s dive right in.
What’s Debt Consolidation, Anyway?
Simply put, debt consolidation means combining multiple smaller loans or debts into one larger loan—typically your mortgage (mashkanta in Hebrew). Instead of juggling separate debts to different banks or institutions, you’re dealing with one payment every month. Sounds simpler already, right?
But here’s the kicker: Not only does consolidation simplify your repayments, but it can also slash your overall interest costs.
Real-Life Example (But Simpler!)
Let’s say you’re currently managing several loans totaling around ₪120,000. Each month, you’re paying back roughly ₪2,500 just on these smaller loans. Meanwhile, you’ve also got a mortgage of around ₪900,000, costing about ₪4,200 per month—and that mortgage is tied to inflation (Madad).
In Israel, many loans and mortgages are “index-linked,” meaning the amount you owe grows as the inflation rate rises. Inflation in Israel typically hovers around 2–5% annually. That means your ₪900,000 mortgage debt might keep increasing each year, quietly ballooning behind the scenes.
But what if you folded those smaller loans (the ₪120,000) into your mortgage?
Why Putting Small Loans into Your Mortgage Makes Sense
When consolidating, you’re essentially adding those smaller debts directly into your mortgage, restructuring the entire amount into a more favorable repayment plan.
Here’s how you’d benefit:
- Lower Interest Rates: Mortgages usually have much lower interest rates compared to standard personal loans in Israel.
- Fixed, Non-Indexed Options: You can shift from an inflation-linked mortgage to a fixed (non-indexed) interest rate. In Hebrew, that’s known as lo tzamud, meaning your repayments won’t keep rising with inflation.
- Massive Long-Term Savings: While extending a smaller debt sounds expensive, the interest saved on your larger, indexed mortgage makes consolidation a smart financial move.
Let’s look at the math briefly:
If your current mortgage (indexed to inflation) grows by approximately 4% each year, you’re effectively paying tens or even hundreds of thousands of extra shekels over time. By converting ₪120,000 of personal debts into a fixed-rate portion of your mortgage, you’ll slightly increase your mortgage payment each month—but drastically cut down on interest over the long haul.
Yes, you might pay an extra ₪40,000–₪60,000 interest on the smaller loan portion. But you’ll likely save around ₪300,000–₪350,000 in inflation-driven interest on your original mortgage balance. You’re actually pocketing hundreds of thousands of shekels over the life of your loan.
Pro Tips to Consolidate Smartly in Israel
Ready to consolidate and save? Follow these quick, actionable steps:
- Check Your Current Loan Conditions
- Gather details on all your outstanding loans: total amounts, interest rates, and repayment terms.
- Meet with a Mortgage Consultant (Yoetz Mashkanta)
- An expert can guide you through the refinancing process, helping you secure the best fixed rates and non-indexed options.
- Choose Your Mortgage Structure Carefully
- Opt for a balance of fixed (lo tzamud) and variable-rate portions, minimizing the risk of inflation-related debt growth.
- Focus on Total Long-Term Savings
- Don’t get distracted by short-term repayment amounts. The real value of consolidation lies in long-term financial health and security.
Common Questions About Debt Consolidation in Israel
Is Debt Consolidation Always a Good Idea?
Usually yes, especially if you’re dealing with high-interest loans or index-linked debts. However, always check with a professional to ensure consolidation fits your specific financial situation.
Can Anyone in Israel Consolidate Debt into a Mortgage?
Typically, yes—but banks will assess your income, credit history, and the value of your property before approval.
Will Consolidation Hurt My Credit Score in Israel?
Initially, there might be a minor impact, but over time, making regular payments will likely improve your creditworthiness significantly.
Bottom Line: Simplify and Save Money
Debt consolidation isn’t just about convenience—it’s about financial freedom and significantly lowering the cost of your debts. By consolidating your loans into your mortgage, you’re taking control of your finances, escaping the inflation trap, and potentially saving hundreds of thousands of shekels along the way.
Too Long; Didn’t Read (TL;DR):
- Consolidating debt means merging smaller loans into your mortgage.
- Mortgages in Israel offer lower, non-indexed (fixed-rate) interest options.
- Consolidation reduces overall debt costs by avoiding inflation-driven increases.
- Small extra monthly payments can save massive sums in the long term.
- Consult a mortgage advisor (Yoetz Mashkanta) for personalized strategies.
Ready to simplify your finances? Consolidation could be your smartest financial decision yet.
