Ray Ethell, managing director of Non Conforming Loans, had to call on his years of broking experience to assist a client who needed to consolidate debt to meet his loan repayments or risk losing his licence as a financial planner.
Clients: Self-employed
Goal: To consolidate debt and reduce monthly repayments
Loan size and term: $1,525,000 on a 25-year term
Location: Sydney
Lender: Non Conforming Loans (near prime product)
Aggregator: Finsure
The scenario
The client runs a financial planning business under a Pty Ltd structure and was a licensed credit representative in his own right, along with being a financial planner. Yes, there is some irony in this.
His turnover had reduced and his personal expenses had increased due to his focus needing to be on his family during a difficult period. Once the tallying was completed, he had $176,000 in personal debt via lines of credit, credit cards and personal loans. The client had been repeatedly knocked back by every lender he could find in trying to refinance these debts against his property.
Like most small businesses in this situation, the client needed to free up cash flow in order to regrow his business but was being held back by the need to service all this debt, with no end in sight. He was also facing pressure on his professional financial planning career because, in the event of a default, he would have been at risk of losing his licence to practise financial planning.
The client was stressed and feeling shame as a result of his debt position spiralling. He felt some embarrassment, unnecessarily in our view, as a result of his predicament. The client’s situation was spiralling towards defaults and possibly court proceedings, and this was giving him a great deal of stress.
He mentioned on a few occasions that even though he was a qualified and registered broker and financial planner he was unaware that loan products like the one we proposed were available. He was also unaware that debt negotiation was a service available in the market for people in his situation.
We provided him with a solution without any judgment or prejudice, and a way forward.
The solution
After completing a preliminary assessment and obtaining a valuation upfront, we needed to work through the parameters of both servicing and reducing the new loan to meet loan-to-valuation ratio restrictions due to a lower valuation than expected.
The client was facing pressure on his career because, in the event of a default, he would have been at risk of losing his licence to practise financial planning
We isolated $60,000 in debt to be paid out in full as these facilities would need to be kept open to support future business growth. We then targeted the remaining $116,000 for informal debt negotiation.
The $60,000 in ‘paid in full’ debt was necessary not only for future business needs. Also, negotiating on these debts required an informal arrangement so it did not impact the client’s credit file as this would have been disastrous had it occurred.
Once all information was available on negotiated payouts, the loan was processed through our Non Conforming Loans white label product.
At settlement, the client ended up paying out $62,000 to settle his $116,000 in unsecured debt, a saving of $54,000. In the process, he reduced his overall debt repayments by more than $2,186.66 per month (or $26,239.92 annualised).
To consolidate all of the client’s debts we had to negotiate with creditors so the new loan would meet the maximum of one year for refinancing and servicing, saving our client $54,000 and a further $2,000 a month in repayments.
The client’s objective and requirements were to achieve this without any impact on his Equifax credit file as a result of the debt negotiation. We were able to do this as per the client’s request. As a result, he saved $54,000 and has now been refinanced back to a prime loan and is still giving valuable financial advice to his clients.
The takeaways
At Non Conforming Loans we understand that the majority of our clients have complex scenarios and that thinking outside the box is crucial when looking for a lending solution.
We open the door to solutions that our customers did not know were possible and help our clients navigate what they feel best meets their requirements and objectives.
Non Conforming Loans prides itself on being the go-to lender for customers who are under duress, and we treat each client with respect, dignity and empathy. We are well versed in highly complex lending solutions for near-insolvent and severely credit-impaired individuals, as well as in debt negotiation with creditors, dealing with trustees, and bankruptcy legislation.
Our basic mission statement is simple: we are here to help find our clients a solution.
Ray Ethell
Managing director,
Non Conforming Loans
