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Amy Small, regional director and finance broker at Professional Lending Solutions, learns that business lending can offer some clients surprisingly huge savings in the consolidation process, even for bank-savvy clients
THE SCENARIO
I had two clients, a couple, book in with me for a debt consolidation structure. Their aim was to take out a new loan to pay off a number of liabilities that were causing them headaches.
The clients had found my website through Facebook. They had been inspired by my education videos on debt consolidation, and their aim was to consolidate some debt to improve their cash flow, after spending many nights awake worrying about not being able to pay the bills.
The couple had no money left over at the end of the month. One of them was employed at a big bank, and while she had assumed all her rates were discounted and competitive against other banks, this was not the case.
They were in their mid-40s with two kids and four investment properties, as well as their home. One of these properties was a commercial office building with a long-term tenant and a commercial loan attached to it at a high commercial rate.
Their loan rates had started to creep up, and they were no longer happy with their current bank. Everything was paid on time, but only with minimum repayments. The couple also had two credit cards with $30,000 limits each, as well as a car lease.
Two of their loans were interest-only, but three were principal and interest, and two of their credit cards had reached their limits. Overall, the clients’ loan interest rates began at 4.9% and increased to the high 6% range across their properties. The interest rate on their credit cards was 17.99%.
The couple were worried that they would never see the end of the tunnel to paying off their properties, which was their original end goal. They had wanted to use these properties to help supplement their future retirement income.
But with that dream becoming a distant reality, they blamed themselves for getting into this position, despite many external forces outside of their control, such as their car breaking down and then their daughter getting sick.
Initially, they thought the only solution was to get a second job to pay off their debts, or to sell one of their properties as a last resort, which was something they wanted to avoid.
THE SOLUTION
There were a few options for the client, but I thought AMP looked like it suited their financial situation best.
AMP had a wonderful policy that allowed a customer to consolidate a commercial loan (a loan for business purposes) and restructure it into a residential property, allowing the client to access a better residential rate. This would release the clients’ commercial property from any lending. The only drawback was that this policy had to be under 80% LVR with the remaining properties.
Luckily, the valuations came back looking fine and we could move ahead. I was able to secure an approval with AMP and pay off the couple’s credit card debts as well.
This excited the clients – having paid off the title to one property felt like the beginning of their end goal being realised.
This meant they were able to refinance five different loans and had interest rates of 3.19% in principal and interest over a 25-year term. The whole process took about one month to secure, approve and settle.
The couple also opened five offset accounts for different purposes and were excited to see the savings.
The total consolidation meant a saving of $4,600 a month for the couple, and the funds have been funnelled back into their loans. They are now on track to pay it all off in 12 years without changing their lifestyle.
THE TAKEAWAY
The clients were happy with the overall outcome of the loan and they have referred two more families to me since then.
When I caught up with them locally, they let me know they had another $3,000 in savings built outside of the original savings figures, and that they no longer worried about not being able to pay their bills.
The key points here are that some lenders aren’t afraid of business lending, which can offer some clients huge savings in the consolidation process, but also that a broker can offer different types of solutions, even to the most bank-savvy clients.
Amy Small
Regional director and finance broker
Professional Lending Solutions
