Debt Consolidation Loan Case Study
David was 28 years old and had a good job.
David had two personal loans and three credit cards. His payment history was not perfect. He was increasingly finding it difficult to manage his repayments.
David's minimum monthly repayments were $1,050 per month. These payments made it very difficult for him to live. A snapshot of his loan accounts revealed the following:
|Loan Account||Interest Rate (%)||Balance||Min. Monthly Repayment|
|Personal Loan 1||27.00||8,000||395|
|Personal Loan 2||13.50||4,000||175|
|Credit Cards 3||18.25||16,000||480|
David wanted to consolidate his debts and therefore applied for a $30,000 debt consolidation loan with a bank. The proposed debt consolidation loan was over 7 years with a minimum monthly repayment of approximately $520 per month. If approved this would ultimately save David approximately $9,500 in interest payments over the life of the loan and his overall minimum monthly repayments would be reduced by $530 per month, thus freeing up cash to allow him to live again..
Did David qualify for the debt consolidation loan?
Each bank has an eligibility criterion which is used to assess if you qualify for a debt consolidation loan or not. It is highly unlikely you would qualify for an unsecured debt consolidation loan if any of the following applies to you:
- You have a bad credit record
- You have a history of late payments
- You have been bankrupt in the past 10 years
- You are in default on any other loan repayments
- You do not have regular employment
Due to insufficient income and a history of late payments David did not qualify for the debt consolidation loan.
David spoke with Fox Symes about other available options which included:
- an Informal Agreement
- a Mortgage Refinance
- a Debt Agreement
- a Personal Insolvency Agreement
- or as a last resort Bankruptcy
Fox Symes assisted David in the preparation and submission of a Debt Agreement. A Debt Agreement is a formal arrangement between David and his creditors.
The Debt Agreement would mean David would have to pay $400 each month for 4 years to his creditors. In total he would pay his creditors $19,200. His creditors would agree agreed to waive all interest on their debt and accept $19,200 of the $30,000 he owed or 65c on the dollar as full and final settlement of his debt. At the end of 4 years David would be debt free.
With the assistance of Fox Symes creditors approved the Debt Agreement. Fox Symes is the largest provider of debt agreements in Australia.
More information on Debt Agreements
If you are in debt and want to know more about the solutions available to you contact us on 1300 098 127 or fill out the short contact form.