Customer saves more than $1,000 a month ($12,000 p.a) using debt consolidation

Let’s take the example of Roger and Ria Smith*.

They would love to take their children overseas to meet family now that COVID restrictions have lifted around the world, but their rising loan repayments means they have limited spare cash.

Their liabilities include:

A $30,000 personal loan for home extensions - $250 per month

A $10,000 credit card debt?- $120 per month

A $40,000 car loan - $1,500 per month

An $800,000 mortgage- $4,314 per month

Total - $6,184 per month

Naturally, the Smiths’ first inclination is to try and reduce their largest monthly outgoing, their mortgage, by asking for a lower interest rate. However, I explained that there are lenders willing to offer them a variable interest rate of 5.04% pa is given their financial situation and scenario.

I also explained that I can also improve the Smiths’ cashflow by consolidating their debts.

This means extending/increasing the loan amount on the Smiths’ mortgage to $880,000 to immediately pay out the providers of the personal loan, credit card debt and car loan.

The personal loan, credit card debt and car loan carried interest charges of 12% pa or more.?

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The Smiths can repay the remainder of these loans as part of their mortgage and at the lender rate of 5.04% pa.

There is more great news for the Smiths. Their total monthly repayment, all being paid at the lower mortgage interest rate, is lowered to $4,845.57.

This means the Smiths have $1,338.43 more to spend each month. This will help them save for their trip sooner.

While the consolidated debt will take longer to pay, the Smiths prefer the improved cashflow and chance to take their children overseas while they are young.

Consolidating their debts has also allowed them to own their car outright. They have cleared the other debts and are dealing with one finance company rather than four.

If you think you might want to learn more about this strategy call me on 0402 626 243 or send me an email to [email protected]

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* All names and details are fictitious and are for illustrative purposes only.

Disclaimer: Any advice and information relating to this article is general only, and has been prepared without taking into account your client’s particular circumstances and needs. Before acting on any advice in this article you should assess or seek independent advice on whether it is appropriate for your client’s needs, financial situation and investment objectives.