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'.
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