Debt Consolidation Loan - Example

A full time office worker, David, was earning a good salary and comfortably servicing his mortgage and loans whilst also providing a comfortable life for himself and his family. However, an unexpected medical condition forced David to leave work for nearly six months for treatment and respite.

On top of this stress, the family were forced to live off credit cards during the period of David's illness as David was the sole income earner of the family. Not being in any position to pay off his loans, David's car and home loans eventually defaulted.

A breakdown of David's loans looked like this:
- Mortgage: $202,000 at $1550 per calendar month
- Credit Card: $22,000 at $660 pcm (also in default with debt agreement, with a $10,000 fee to pay to close the account).
- Car Loan 1: $30,000 at $390 pcm (3 months behind)
- Car Loan 2: $29,000 at $900 pcm (3 months behind) 

Simply put:
- Home Value: $330,000
- Total Loans: $254,000
- Current repayments: $3500 

Critical considerations in David's situation were:
- The bank was ready to foreclose on David's home and car loans.
- The credit card company was willing to charge David the $10,000 account closing fee despite his situation. 

Once David had recovered and was back at work, he realised that it would be impossible for him to try to pay off his defaulted loans and that he needed financial help to get back on track. Initially a number of loan applications David made through some traditional lenders were rejected. David was then advised by a close friend to look into securing a debt consolidation loan. 

Debt consolidation specialists were then able to assess David's situation and work out the following solution - to refinance all of David's loans into one: 

- Loan: $254,000
- Repayment: $2438 

By reducing his monthly outgoing funds by nearly $1000, and getting the lenders off his back, David was able to alleviate the financial stress and move forward. 

If you find yourself reading David's story and relating to his situation, you should consider getting to know more about how a debt consolidation loan could help you. Many families have been helped just as David was by refinancing through a debt consolidation specialist. 

For more information see 'Debt Consolidation Loans - The Facts'.