What
is Debt Consolidation
Debt consolidation is simply, merging of several unsecured
debts (loans) into a single loan with a single monthly repayment.
After debt consolidation your monthly repayments should be
lower as well as your interest rate. Also, your debt will
be much easier to manage.
Regardless of your credit rating we can find a solution for
your financial situation. Paid defaults, unpaid defaults,
bad credit rating and arrears are all common occurrence associated
with debt. Simple debt consolidation is most effective for
people with clean credit rating, however there are several
solution for your debt problems.
Below is an example of debt consolidation:
Before
debt consolidation there are 4 different loans
each month.
| Type of loan |
Remaining to pay |
Interest rate |
Monthly repayments |
| Credit Card 1 |
$17,000 |
17.0% |
$422 |
| Credit Card 2 |
$9,000 |
16.5% |
$221 |
| Credit Card 3 |
$6,000 |
14.0% |
$140 |
| Personal Loan |
$15,000 |
19.0% |
$389 |
| TOTAL |
$47,000 |
-- |
$1172 |
After debt consolidation monthly
payments are reduced from $1172 to $1034. Saving
$138 each month.
|
| Type of loan |
Remaining to pay |
Interest rate |
Monthly repayments |
| Personal Loan |
$47,000 |
11.5% |
$1034 |
| Savings per month |
$138 (Every
month extra $138 in the pocket.) |
|
What is Mortgage Refinancing?
This is the process of combining several debts such as credit
cards, personal loans and other unsecured debts into your
existing mortgage. Mortgage rates are lower than those of
loans, so your total monthly repayment will be lower than
before mortgage refinancing.
To refinance your mortgage you must have equity in your home,
which means the value of your home is higher than the amount
of money you owe to the bank. Many banks will only loan up
to a certain percentage of what your property is worth.
You can consolidate all of your existing debts into your mortgage
with lower total repayments and lower interest rate if your
credit rating is clear, no defaults. Some institutions will
offer mortgage refinancing if you have defaults, but at a higher
interest rate.
If you have a fixed interest rate mortgage you will have to
change to a mortgage with variable interest rate. Refinancing
your home takes about 6-7 weeks, it varies from bank to bank.
Below is an example of mortgage refinancing:
Before
mortgage refinancing there are 6 different loans
each month.
| Type of loan |
Remaining to pay |
Interest rate |
Monthly repayments |
| Home Loan |
$150,000 |
6.9% |
$1051 |
| Car Loan |
$20,000 |
9.0% |
$415 |
| Credit Card 1 |
$9,000 |
16.5% |
$240 |
| Credit Card 2 |
$6,000 |
14.0% |
$200 |
| Personal Loan 1 |
$19,000 |
12.5% |
$427 |
| Personal Loan 2 |
$15,000 |
14.0% |
$349 |
| TOTAL |
$219,000 |
-- |
$2,682 |
After mortgage refinancing monthly
payments are reduced from $2,682 per month to $1,633
per month. Saving $1,049 each month.
|
| Type of loan |
Remaining to pay |
Interest rate |
Monthly repayments |
| Home Loan |
$219,000 |
7.6% |
$1,633 |
| Savings per month |
$1049 (Every
month extra $1049 in your pocket.) |
|
1. What is a Debt Agreement?
A Debt Agreement is a legally binding agreement with your
creditors. Usually you pay an agreed monthly sum for a period
of 3 to 5 years and the interest on your debts is frozen.
In many cases the money you have to repay using debt agreement
will be less than the total amount you owed before the debt
agreement. Debt agreement will protect you against legal action
by your creditors.
Your monthly payment will depend on your income and liabilities.
You can not use debt agreement process if:
a) you have been bankrupt or had a previous debt agreement
in the last 10 years.
b) your assets exceed $75,075
c) your income for the next 12 months is expected to exceed
$75,481 (before tax).
d) your unsecured debts exceed $75,075
Your Debt Agreement proposal will be recorded on the National
Personal Insolvency Index register. Your name will also be
recorded on a commercial credit reference database for 7 years,
after which time it will be deleted.
If you have property, you will not usually
have to sell your property when entering into debt agreement
Your house mortgage stands outside your Debt Agreement. Of
course, you would have to continue paying your mortgage payments.
There are no costs involved in debt agreement,
only the agreed monthly payments.
What is Personal Insolvency Agreement
A Personal Insolvency Agreement is a legally binding agreement
with your creditors, a process by which a debtor (you) may
make a proposal to their creditors which they consider and
vote upon at a formal meeting.
Not all creditors need to vote in favour
of the proposal for Personal Insolvency Agreement to be approved,
however a majority must be in favour of your proposal. Once
it is approved by majority of your creditors Personal Insolvency
Agreement will become legally binding on all creditors.
If you have unsecured debts such as credit
card debt, store card debt, etc and you cannot pay them and
you exceed the Debt Agreement thresholds you should consider
a Personal Insolvency Agreement.
Personal Insolvency Agreement proposal is
prepared and presented to your creditors which is accepted
in most of the cases. Your creditors will most likely accept
a greatly reduced amount of money you owe to them. Recommended
time period for a Personal Insolvency Agreement is three to
five years. All necessary documents the meeting of creditors
will be organized by us on your behalf.
Once approved, a Personal Insolvency Agreement
will protect you against any legal action your creditors may
have been entitled to take against you. Also, the interest
on your debts will be frozen, you will only have one monthly
payment over the agreed period of your Personal Insolvency
Agreement.
To check if you qualify for a Personal Insolvency
Agreement contact our debt experts now for free and confidential
debt advice.
1. What is Bankruptcy?
Bankruptcy is a legal process for individuals who can
not pay their debts on time. Bankruptcy usually lasts
for 3 years, this term may be extended for up to 8 years.
At the end of your bankruptcy you will be released from
the debts. Some debts such as child support and fines
will be not affected by bankruptcy.
Your Bankruptcy Trustee will sell all of your assets
except:
a) Most ordinary but not luxury household and personal
goods
b) Tools of trade worth less than $3,150
c) Motor Vehicle worth less than $6,150
d) Superannuation (subject to limits)
When you are a Bankrupt, you may have following obligations/restrictions:
a) You must keep your Bankruptcy Trustee fully informed
as to your residential address and the income you earn
b) You must complete a Statement of Affairs at the commencement
of your Bankruptcy
c) You must surrender your passport to your Bankruptcy
Trustee
d) You cannot be a director of a company whilst you are
bankrupt
e) You may be liable to pay income contributions
f) You cannot incur debts of more than $4,370* without
disclosing your bankruptcy
g) You must deliver all of your records to your Bankruptcy
Trustee
h) You may be liable to pay income contributions
i) You must disclose to your Bankruptcy Trustee any assets
which you may acquire during your bankruptcy
j) Your Bankruptcy term may be extended for up to eight
years (if you fail to co-operate with your Bankruptcy
Trustee)
k) Any money in your bank account will be collected by
your Trustee and your credit cards will be cancelled
*amount current as at January 2007
Normally a Bankruptcy lasts for 3 years. You can terminate
bankruptcy earlier if you put forward a proposal to your
creditors by which you will put them in a better position,
ie. your creditors will receive more money.
