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Consoldation Case Study

If you have multiple debts consolidating your loans can lower your repayments or pay off your loans sooner. Here is a case study showing how consolidating can do this:

Introducing Simon and Jane:

• Simon and Jane have two daughters in high school
• Home is valued at $600,000
• They currently have:
  • $400,000 owing on their home loan
  • $20,000 personal loan to fund their daughters' education
  • $10,000 on Simon's credit card
• Keen to consolidate their personal debt
• Would also like to pay off their home loan faster

A possible solution:

• Use their home loan to pay off personal loan and credit card debt

• Debt	Starting balance	Interest rate (p.a.)	Monthly payments
  Home loan	$400,000	8.37% for 30 years	$3039
  Personal loan	$20,000	12% for 5 years	$445
  Credit card	$10,000	15%	$300
  Total	$430,000	As above	$3,784

If the Home Loan incorporated the personal loan and credit card (making the Home Loan $430,000 in total) repayments decrease:

This is because the personal loan and credit card are now at 8.37% interest p.a. under the Home Loan

After consolidation - options:

The potential benefits

• A simple way to save money by minimising interest payable is by taking advantage of the lower interest rate available on a home loan
• Results in following potential benefits
  • Save on monthly repayments, increasing cash flow OR
  • Pay off loan faster and further reduce total interest payment