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    advice re debt consolidation

    Hello, I'm after some information and advice on behalf of my daughter and her partner. They currently have 3 loans they are paying off - mortgage, personal loan and car loan. They would like to consolidate and have applied, however they were rejected even though his parents were on the application as guarantors. The reason they were given is that the value of the consolidated loan is more than the value of the house, (about $5k). The value of the property has decreased since they purchased it. They also believe that his parents do not have a good credit rating as they have a lot of personal debt in the form of credit cards.

    They are on a combined income of $120K gross and pay $1800 per fortnight combined on the loans (combined value of $385k) which leaves them very little cash once living expenses and insurances are factored in.

    My question is, given their incomes and that they have both been in their respective full-time jobs long-term, do they have any chance of a bank accepting their application or will they have to wait till they build some equity and/or the market turns and the value of the house increases? Another option that has been offered to them is my sister and her husband going garantor for them. They own a property valued at over $1,000,000 with less than $50,000 owing on the mortgage. My BIL is a company director, he earns a 6 figure salary and they have an excellent credit rating.

    TIA for any responses.

    #2
    Originally posted by Plark View Post
    Hello, I'm after some information and advice on behalf of my daughter and her partner. They currently have 3 loans they are paying off - mortgage, personal loan and car loan. They would like to consolidate and have applied, however they were rejected even though his parents were on the application as guarantors. The reason they were given is that the value of the consolidated loan is more than the value of the house, (about $5k). The value of the property has decreased since they purchased it. They also believe that his parents do not have a good credit rating as they have a lot of personal debt in the form of credit cards.

    They are on a combined income of $120K gross and pay $1800 per fortnight combined on the loans (combined value of $385k) which leaves them very little cash once living expenses and insurances are factored in.

    My question is, given their incomes and that they have both been in their respective full-time jobs long-term, do they have any chance of a bank accepting their application or will they have to wait till they build some equity and/or the market turns and the value of the house increases? Another option that has been offered to them is my sister and her husband going garantor for them. They own a property valued at over $1,000,000 with less than $50,000 owing on the mortgage. My BIL is a company director, he earns a 6 figure salary and they have an excellent credit rating.

    TIA for any responses.
    If you take the mortgage out of the picture, what do they owe on the personal loan and car? It doesn't seem to me like consolidation is probably the right answer and I don't think including your mortagage payment in your "debt repayment" gives us a clear picture of what kind of situation they are in. If they bought more house than they can afford that is a problem all by itself. Without knowing the specifics of the other two loans, I could venture to bet that on a $120k income they should be able to pay those off without consolidation with some careful budgeting and spending management.

    In general, consolidation loans are a rip off and with that kind of income there likely are other options for becoming debt free.

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      #3
      They ABSOLUTELY POSITIVELY should NOT do this if it means having someone else co-sign the loan! All that will accomplish is wrecking that person's finances and destroying family ties when this loan goes bad.

      To give any more advice, we need to see their budget including details of the loans and all of their expenses.
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

      Comment


        #4
        I agree with the above comments: with that kind of income they *must* be able to squeeze some more efficiency out of their finances, surely? It sounds like they are wasting loads on unnecessary doodads just for show or something. Got the figures for us to peruse?

        Guarantor: generally a bad idea. The banks know when loans are likely to go bad. If they're struggling with that kind of income they don't know how to look after money. Don't join a sinking ship.

        Comment


          #5
          It would be a bad idea for anyone family or friend to get involved with your daughter and her partner's finances? No one should co sign any loan for them. They will have to get out of this mess on their own. For that, we will need more info on their situation.
          Brian

          Comment


            #6
            Originally posted by Plark View Post
            They are on a combined income of $120K gross and pay $1800 per fortnight combined on the loans (combined value of $385k
            385K in debt on a 120K income doesn't actually sound all that bad since it includes their mortgage. If they stayed within guidelines and spent 3X income and put down 20%, that would give them a mortgage of $288,000 plus about 100K in other debt.

            In 1994, we were earning about 85K, took out a 128K mortgage, I had 100K in student loans and my wife still had a small car loan so were in that same range with debt about 3 times income.

            They should be able to fix this on their own.
            Steve

            * Despite the high cost of living, it remains very popular.
            * Why should I pay for my daughter's education when she already knows everything?
            * There are no shortcuts to anywhere worth going.

            Comment


              #7
              Originally posted by Plark View Post
              They are on a combined income of $120K gross and pay $1800 per fortnight combined on the loans (combined value of $385k) which leaves them very little cash once living expenses and insurances are factored in.
              I'm not understanding why they need a consolidation or to bring other family members into the situation. It sounds as if they are making the required loan payments, affording their living expenses including insurances. They have a little cash left over, even if it is very little. What else do they need cash for if their expenses are met?
              "There is some ontological doubt as to whether it may even be possible in principle to nail down these things in the universe we're given to study." --text msg from my kid

              "It is easier to build strong children than to repair broken men." --Frederick Douglass

              Comment


                #8
                They need to worry more about where the rest of their money is going, not just the debt. That is a decent income; they should not have trouble making payments. Have you suggested a budget to them? And NO, NO, NO for co-signers on the loan. Just asking for trouble.

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