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#5 Debt Destroyer

Destroy all your small debts stopping you from your property journey.

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STRATEGY FIVE - DEBT DESTROYER

Have you got a bunch of small debts hanging around? Credit cards, overdrafts, those kinds of things?

You need to know about the Debt Destroyer.

This strategy helps people get into their first home. It's also useful for people who want their first investment property.

What the Debt Destroyer Strategy does

If you've got a bunch of small debts, it’s easy to miss one. Just accidentally not pay it.

That makes banks nervous that you won't pay your mortgage. So they might say "no" to your mortgage application.

That's where the Debt Destroyer comes in.

With this strategy, you merge all your small debts into one loan.

So instead of having lots of small payments, you've just got one to worry about.

How do I set up the Debt Destroyer?

First, you apply for a loan big enough to pay off all those smaller debts.

If you're a first home buyer, this could be a personal loan (“debt consolidation loan”). Or, you might borrow this against your house if you already own one.

Once approved, you take this loan and pay off your credit cards, overdrafts, and other debts.Now you’re left with just one loan to focus on.

What does this actually do?

It’s a game-changer.

With a single payment to worry about each month, you know what you need to pay and when.

That helps you be better at budgeting. So you can sort your finances out.

After a couple of months, the bank will see that you can manage your money and are worth lending money to.

Don't make this mistake with the Debt Destroyer

One mistake Kiwis always make is they take out the debt consolidation loan.

They pay off their credit cards.

But then they're out for drinks on a Friday night, and the credit card comes back out! You might think, “I’ll shout the next round!”

Here's the thing. When you pay off your credit card, the bank won't force you to cancel it. So some Kiwis pay off their credit card debt … only to get into more of it!

That’s why you've got to cancel your credit cards, so you don't get tempted to whip them out when you're tight on cash.

"The Debt Destroyer changed everything"

Jenny and Bill wanted to buy their first investment property. But they faced a roadblock.

They earned good incomes. Jenny worked as a Chiropractor, earning $90k per year. Bill, he's a Sound Engineer earning $70k.

But, they hit a snag when applying for a loan from the bank.

What stopped them? Those pesky little short-term debts that had piled up over the years.

Spontaneous holidays, new furniture, and even a car. Through this, Jenny and Bill had racked up many small debts:

  • Their credit card had $2,000 on it,
  • They had an AMEX card with $3,000 owing,
  • An overdraft of $1,000,An $8,000 car loan,
  • and a personal loan of $3,500 used to buy a road bike at a staggering 15% interest rate.

What made the bank nervous? They were also struggling to stay on top of all these small repayments.

That's where Jenny and Bill used the Debt Destroyer.

My team at Catalyst helped them get a $15,000 top-up loan against their home.

They used this to pay off some of their small debts. They also decreased the limits of their credit cards.

Doing this turned Jenny and Bill's tangle of debts into one single, manageable payment.

Using the Debt Destroyer strategy allowed them to –

  • Feel like they were on top of their debts
  • pay their debts on time
  • make it more likely that the bank says 'yes' when they apply for a mortgage.

This all happened about 4 months ago.

Last week the bank said 'yes' to their mortgage application.

Within the next 2 months, they'll own their first investment property.

Have any small pesky debts you're struggling to keep on top of?

Get in touch.

Peter Norris

Peter Norris

Mortgage broker for over 10 years, property investor and Managing Director at Opes Mortgages

Peter Norris, a certified mortgage adviser with 10+ years of experience, serves as the Managing Director at Opes Mortgages. Having facilitated over $1.2 billion in lending for 2000+ clients, Peter is a respected authority in property financing. He's a frequent writer for Informed Investor Magazine and Property Investor Magazine, while also being recognized as BNZ Mortgage Adviser of the Year in 2018 and listed among NZ Adviser's top advisers in 2022, showcasing his expertise.

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