Debt Consolidation is extremely common nowadays but there is still a lot of doubt surrounding what it involves?
The biggest question I am asked is: “Won’t this mean I pay more over all?“
The answer is No.
With Debt Consolidation, you can minimise your overall repayments to the lenders and save yourself thousands of dollars over the life of the loan.
Take the following example:
Travis and Jackie have a few debts which they have considered consolidating. Listed below are their liabilities:
Monthly Repayment: $2,026
Monthly Repayment: $600
Total Limit: $25,000
Monthly Repayments: $700
TOTAL DEBT: $455,000
TOTAL REPAYMENT PER MONTH: $3,326
Now, I go out and sit with them and explain that with the current market, they can definitely attain a better rate on their home loan as well as consolidate some of this debt to make life that little bit easier to manage.
If we take a NEW home loan amount of $465,000 (which includes an extra $10,000 in an offset facility), we look at the following scenario:
NEW HOME LOAN:
Monthly Repayment: $2,140
SAVINGS PER MONTH: $1,186
Now, straight away there, we can see that by increasing the home loan to pay out the Car Loan and the Credit Cards, we have a simple one monthly repayment for Travis and Jackie instead of 3 and saved them a whopping $1,186 per month.
However, let’s say we get them putting some of those supreme savings back onto their loan? What this will do is actually allow Travis and Jackie to pay off their loan a lot sooner.
To be conservative, let’s place half of the monthly savings back onto the loan as an extra repayment. This still leaves them with some extra cash in the hand for date night! 😉
Half of Monthly Savings / Extra Monthly Repayment: $593
This would save Travis and Jackie almost 10 years off the life of their 30 year loan as well as saving them $110,000.
I think Travis and Jackie did rather well, don’t you?
If you would like to learn more about how debt consolidation could save you money, contact Red Tick Home Loans using the link above.