| Many people today are having difficulty meeting | | | | lease should be such that when you come to sell |
| their loan commitments and as a result look to | | | | the car its value should be sufficient for you to |
| debt consolidation as a means to reduce their | | | | pay out the residual under the lease. |
| monthly outgoings. The normal process for debt | | | | If you decide on debt consolidation then after 5 |
| consolidation is to wrap up your credit card debt, | | | | years of a standard 25 year loan you will have |
| any personal loans, your car repayments perhaps | | | | only made a minimal reduction to your car loan |
| - all into your home loan mortgage. There is no | | | | and it is unlikely that if you sold the car after 5 |
| doubt that debt consolidation is attractive in that | | | | years you would get a price that would repay the |
| the interest rate you pay on your credit cards | | | | outstanding loan |
| and personal loans is always higher than that | | | | Compare $25,000 car. 5 year lease of $15,000 |
| payable under your standard mortgage because | | | | @10.5% with residual of $10,000 |
| the personal debt is unsecured - you can | | | | Monthly instalment $322. Total interest over 5 |
| disappear and the lender has no recourse to a | | | | years $4345 |
| property or asset to sell in order to recover the | | | | At the end of 5 years you owe $10,000. |
| money it has lent to you. | | | | Car value likely to be around $10,000. |
| Debt consolidation also appeals when you look at | | | | With $25,000 debt consolidation into 25 year |
| the monthly repayment you are making on your | | | | mortgage |
| new car or used motor vehicle. Lease and hire | | | | Monthly repayment $201 |
| purchase repayments on a new car or used | | | | At end of 5 years you will owe around $22,000 |
| vehicle are always high because they include a | | | | on the car |
| large slice of principal each month because you | | | | Car value will not be sufficient to repay the car |
| are required to repay most of the new car price | | | | loan portion of the debt. |
| within a maximum of 5 years. The term is short | | | | So while debt consolidation certainly reduces your |
| as opposed to your standard 25 - 30 year term | | | | cash flow and is a far better option to losing your |
| under a home loan. When you look to debt | | | | home if you are struggling with debt repayments, |
| consolidation to ease these payments and | | | | because you only pay off a small amount of |
| improve your cash flow you must remember that | | | | principal in the early years of a longer term home |
| in doing so, you will pay significantly more over | | | | loan, you are not financially better off in the long |
| the loan period than you would have if you had | | | | term because you have paid significantly more |
| managed your car loan repayments under a lease. | | | | interest and if it is a car lease you are refinancing |
| If you can avoid debt consolidation and stick with | | | | in the debt consolidation process, because cars |
| your lease then | | | | are depreciating in value from the moment they |
| 1. you will significantly reduce the amount you | | | | leave the showroom, the value of your car when |
| owe on the car within 5 years | | | | you come to sell it will not be sufficient to repay |
| ( residual will still remain) | | | | the car loan portion of your home loan debt. |
| 2. the amount by which you have reduced the | | | | |