Case study: consolidating $61,000 of consumer debt into a refinance

The situation

A dual-income couple carrying a $34,000 car loan at 11.9%, two credit cards totalling $16,400 at 20.9%, and an $11,000 personal loan at 13.5%. Combined minimum repayments were roughly $1,650 a month against a $2,890 mortgage repayment.

They weren't in arrears, but they were making no headway and had started using one card to cover the other.

The challenge

• High consumer debt reduced their borrowing capacity with mainstream lenders
• One card had two late payments within the previous twelve months
• LVR after consolidation had to stay under 80% to avoid LMI
• Some lenders cap the number of debts they'll consolidate in one refinance

What we did

We valued the property at $845,000 against an existing loan of $538,000. Consolidating $61,400 took the loan to $599,400 — 71% LVR, well within policy.

Rather than absorbing everything into a single 30-year loan, we split the consolidated amount into its own $61,400 facility set on a seven-year principal-and-interest term. The repayment on that split was $920 a month — still $730 less than the previous minimums — and the debt is genuinely gone in seven years rather than thirty.

We also closed both credit cards at settlement as a condition of approval, which the lender required and the clients agreed with.

The outcome

• $61,400 of consumer debt cleared at settlement
• Blended rate dropped from about 14.6% to 6.19%
• $1,180 a month freed up across the household budget
• Consolidated split set to a 7-year term, not stretched to 30
• Both credit cards closed, removing $18,000 of limits from future assessments

The part people skip

Consolidation only works once. If the cards get reopened, you end up with the old debt back plus a larger mortgage. Closing the limits at settlement isn't punishment — it's what makes the structure hold, and it also lifts your borrowing power next time because lenders assess card limits, not balances.