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STATEMENT OF ADVICE

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					Debt Management
Debt Management refers to the strategies that are employed to assist the debtor with repayment of their
debt to essentially get their financial situation under control.

There are two types of debts: efficient debt which is tax deductible and non-efficient debt which is not tax
deductible.

Efficient / Good Debt

Efficient debts are good debts. Good debts are debts that generally appreciate in value over time which will
result in increased wealth or assets and allow you to take advantage of opportunities that enable you to
potentially make money now rather than later. The table below gives will give you an idea of what are
good debts and those that are bad debts.

Efficient / Good Debt                                                   Non-Efficient / Bad Debt
Investment property loan                                                Mortgage on your principle place of residence
Tax deductible debt                                                     Credit card debt not being repaid in full before the
                                                                        interest free period
Business loan                                                           Personal loan
Investment /margin loan                                                 Car loan
Refinancing to a lower interest rate                                    Holiday loan
Generating debt to purchase quality investments that                    Borrowing to purchase anything that reduces in
have potential to increase in value                                     value immediately
Borrowing for investment                                                Non tax deductible debt

Non-Efficient / Bad Debt

Non-efficient debts are bad debts. Bad debts are incurred when consumer items which depreciate in value
are purchased on credit (credit cards and or personal loans) and are not repaid in full. Purchasing these
disposable items results in no financial gain as the assets depreciate in value.

Debt Management Strategies

Debt Consolidation

Debt consolidation is about managing your debts to assist you in repaying them quicker. It is the process of
transferring two or more of your unsecured debts and combining them into a single loan so that you only
need to make one repayment instead of having to worry over multiple repayments of different amounts,
changing interest rates and multiple due dates and fees each month. Interest rates on debt consolidation
loans are often less than credit card and personal loans.

Please ensure that prior to consolidating your debts; you are aware of the terms and conditions, fees and
charges you may incur from terminating your existing debts and in establishment of the new loan.




 The information contained in this document is general in nature only unless read in conjunction with the Statement of Advice provided
by your adviser. Matrix Planning Solutions Limited, in preparing this document, does not take into account your financial situation and
objectives. You should not act on the information without receiving a Statement of Advice. Version 1.0
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  The information contained in this document is general in nature only unless read in conjunction with the Statement of Advice
         V1
  provided by your adviser. Matrix Planning Solutions Limited, in preparing this document, does not take into account your
Eliminate Non-Efficient Debt (Non-Deductible Debt)
  financial situation and objectives. You should not act on the information without receiving a Statement of Advice.

Debt should be tackled by firstly paying down non-deductible debt and then deductible debt starting with
loans that have the highest interest rates and working your way down. For the majority of people, this
usually involves paying down credit cards and then any personal loans such as a car loan and then finally
your home loan.

If you have equity in your assets such as your home, you can look at borrowing against this to pay off high
interest debts such as credit card debts and personal loans. In effect you are transferring your high interest
debts to a much lower interest rate.

However care should be taken if you use this strategy as the strategy doesn’t eliminate debt. It shifts it
from high-interest to low-interest. However it’s important you retain making the same overall loan
repayments otherwise it would take longer to pay off the combined debt and you end up paying more
interest over the life of the loan. If you take out more equity than you require you are likely to continue
accumulating debt in the long run and doing so will put your house at risk.

Increase Repayment

Increasing your repayments by paying more than the minimum will allow you to reduce your loan faster
and save on interest payments. For example if you put in an extra $200 per month on a $300,000 loan with
a 7.5% interest rate for a loan term of 25 years, you will save $85,125 in interest and reduce your loan by 5
years.

Please ensure that you check with your lender about repayment limits or penalties that may apply.

Increase Repayment Frequency

Increasing the frequency of your repayments can also save you interest and allow you to pay off your loan
faster. If you are currently making monthly repayments, consider making fortnightly payments. By the end
of each year you will have paid the equivalent of 13 monthly payments instead of 12, thereby reducing the
life of the loan and saving you thousands in interest. The more frequently you pay the less interest you will
attract.

For example if your mortgage was $300,000 with a 7.5% interest rate for a loan term of 25 years, by
switching from monthly to fortnightly repayments you will save approximately $81,000 in interest and
reduce your loan by almost 5 years.

Please ensure that you check with your lender about repayment limits or penalties that may apply.

Restructure Your Loan/ Debt Restructuring

Debt restructuring refers to the process of reallocating or altering the terms of a loan in order to enable the
debtor to repay the loan to the creditor. The restructuring is an adjustment of the loan terms made by both
the debtor and creditor to ensure that the loan is repaid in full to the creditor without too much of a loss
for the debtor.

Things to consider when restructuring your loan

         Look at your current loan. Make a list, work out what you find useful and those features that you
          do not need.



The information contained in this document is general in nature only unless read in conjunction with the Statement of Advice provided
by your adviser. Matrix Planning Solutions Limited, in preparing this document, does not take into account your financial situation and
objectives. You should not act on the information without receiving a Statement of Advice. Version 1.0
                                                                                                                                          2
  The information contained in this document is general in nature only unless read in conjunction with the Statement of Advice
          V1
       Consider the Matrix Planning Solutions the new loan. Do the sums and consider the savings now
  provided by your adviser.costs associated with Limited, in preparing this document, does not take into account your
                                                                                                         and in
  financial situation and objectives. You should not act on the information without receiving a Statement of Advice.
          the future. Costs include application fees, establishment and handing fees, monthly account fees.
         Look at the exit fees to get out of your existing loan. Early settlement and discharge fees can be
          high especially for fixed rate loans.
         Before you make the switch, speak to your current lender. They may want to retain your business
          and you may be able to negotiate more favourable terms.
         Compare and weigh up the rates, fees, features, flexibility and service from your new and existing
          loan.

Loan options

Below are some of the most common options to consider when looking for a loan.

     Variable rate loan
Variable rate loans have an interest rate that varies as market interest rates change. As a result your
minimum repayments may vary. Generally variable rate loans have a lower interest rate than fixed rate
loans. Compared to fixed rate loans, they also generally have more features such as the ability to make
additional repayments, vary payment frequency, redraw facility, offset facility and portability.

     Fixed rate loan
Fixed rate loans have an interest rate that remains fixed for the entire loan term regardless of the market
interest rate. If interest rates rise you will have the security of knowing that your regular repayments will
not change until the end of the fixed period. Loans can be fixed to all or a portion of your loan.

      Split loan
Split rate loans allow you to split your loan amount between fixed interest and variable interest rates. This
loan may be suitable if you require some security but at the same time would like the ability to make
additional repayments.

     Interest rate
Consult with your mortgage broker who will have access to many different lenders and hundreds of loan
products. They will be able to assist you in organising a loan to suit your individual circumstances.
Alternatively you may want to check online websites such as canstar.com.au which allows you to compare
interest rates, credit cards, term deposits, savings accounts, insurance for your car, home and health. You
may also wish to discuss with your current banker to look at your options of lower interest rate products.

     Offset account
Many lenders offer an Offset Account, which is essentially a savings account that is linked to your home
loan. Rather than earn interest on deposits in the offset account, the deposits are used to "offset" the
principal of the loan account, thus effectively reducing the principal of the loan when calculating interest
charges on the loan. By keeping all of your income and savings in this account for as long as possible, allows
you to minimise the daily balance owing and thereby reduce the term of your loan.

For example, if you have a home loan of $300,000 and you have a balance of $5,000 in your 100% offset
transaction account; you only pay interest on $295,000. Interest is calculated on a daily basis. This is one
way that you can pay off your mortgage earlier and still have access to all your funds.

A 100% offset loan is ideal if you have an investment loan as you are able to withdraw funds from the
account whilst maintaining full deductibility of interest on your loan.




The information contained in this document is general in nature only unless read in conjunction with the Statement of Advice provided
by your adviser. Matrix Planning Solutions Limited, in preparing this document, does not take into account your financial situation and
objectives. You should not act on the information without receiving a Statement of Advice. Version 1.0
                                                                                                                                          3
  The information contained in this document is general in nature only unless read in conjunction with the Statement of Advice
          V1
       Line Of Credit (LOC)
  provided by your adviser. Matrix Planning Solutions Limited, in preparing this document, does not take into account your
  financial situation and objectives. You should not act on the information without receiving a Statement of Advice.
A line of credit is an interest only variable rate loan secured against a residential property allowing access
to funds whenever you need them. A line of credit works in a similar way to a credit card except with a
substantially lower interest rate. Funds can be withdrawn up to your approved credit limit. You are
required to make payments to at least cover the interest only repayments. LOC loans therefore have the
flexibility of a transaction account as cash is available at call to meet any day to day living expenses. The
LOC can be used repeatedly with having to re-apply whenever you need cash.

Make a Lump Sum Payment

A lump sum repayment made to your loan will reduce the amount of interest you pay and subsequently
reduce the time to repay the loan.

For example if your mortgage was $300,000 with a 7.5% interest rate for a loan term of 25 years by making
a $1,000 lump sum payment 5 years into the loan will save you approximately $3,446 in interest payments
and take 2 months off the term your loan.

Debt Recycling

Debt recycling is the process of converting the equity from your existing home into a Line of Credit so that
these funds can be withdrawn for investment. Repayments to your principal mortgage will still be made
however any investment income from your geared investment as well as surplus cash flow are used to
reduce your outstanding home loan balance, thereby reducing your Non Deductible debt and converting
this into Deductible debt. The investment loan is interest-only and allowed to capitalise. The result over
time is a lower home loan and a higher investment loan for the same cash outlay. This may be a tax
effective strategy for those with high marginal tax rates.

Use Your Credit Card Wisely

Whenever you make a financial move, whether it be an enquiry, application, repayment, or file for
bankruptcy, it is being recorded in your credit file. Ensuring that you maintain a good credit rating is
important should you require a loan at some stage. A few ways to ensure that you use your credit card
efficiently:

Pay your Credit Card Bill on Time
Ensuring you pay your credit card on time means that you won’t incur a hefty interest on the outstanding
amount or any penalty fees. You may consider setting up a direct debit to prevent late payments.

Pay More than the Minimum
If you have the funds it is best to pay the entire balance by the due date so you won’t incur interest.
However if you are not able to do so you should pay off as much as you can afford as paying the minimum
will only add interest to the total amount you owe.

Shop Around for the Right Card
Things to consider and look for when selecting a card:
     A low annual interest rate. Beware of cards which offer a low introductory rate but then increase
        the rate after a certain period. E.g. ‘Honeymoon’ rates often have an increase after the
        ‘honeymoon period’ is over.
     A low credit card annual fee. Check all other fees such as late payment fees, over limit fees etc.
        Some credit card companies do not charge annual fees.
     Having a low credit limit to limit your spending



The information contained in this document is general in nature only unless read in conjunction with the Statement of Advice provided
by your adviser. Matrix Planning Solutions Limited, in preparing this document, does not take into account your financial situation and
objectives. You should not act on the information without receiving a Statement of Advice. Version 1.0
                                                                                                                                          4
  The information contained in this document is general in nature only unless read in conjunction with the Statement of Advice
          V1
       Interest fee periods: Most Solutions interest free period for you does not take into account your
  provided by your adviser. Matrix Planning offer an Limited, in preparing this document,to pay the balance before interest
  financial situation and objectives. You should not act on the information without receiving a Statement of Advice.
          begins to accrue.
         Limit the number of credit cards: Having too many cards can damage your credit rating score as
          well as add to your debts. Try to limit your credit cards to a maximum of 2.

Advantages and Disadvantages of Debt Management

The advantages include:

         Create an investment portfolio sooner by replacing inefficient debt with efficient debt
         Debt consolidation helps you to save money by reducing the amount of interest you pay
         Debt consolidation can get out of debt faster by paying a much lower rate of interest
         Debt consolidation saves you time as when you consolidate your debt you only have to make one
          repayment instead of having to make several payments
         Interest rates on debt consolidation loan are often less than credit card/personal loans.
         Good debt can assist to increase your net worth as these generally appreciate in value over time.
         Using equity from your home loan enables you to borrow to pay off high interest debts such as
          credit cards and personal loans at a much lower interest rate.
         By accelerating the reduction of your inefficient debt you will reduce your total interest payments
          and the duration of your loan.
         Increasing the amount of your loan repayment will result in a reduction in the interest charged and
          principal owing on the loan.
         By making an additional lump sum payment to your loan, you are effectively earning an after-tax
          return equivalent to your loan interest rate.

The disadvantages include:

         Some offset accounts charge a slightly higher interest rate than standard home loans. Some have
          higher account keeping fees.
         Those using Lines of credit loans will need to be responsible so that they do not erode all the equity
          in their home.
         For variable rate interest loans, if interest rates rise, your repayments will increase.
         Fixed rate loans generally have a higher interest rate than variable loans at the time of taking out
          the loan.
         Fixed rate loans generally have restrictions such as limits being applied on additional repayments.
          There may be a fee charged to make additional repayments. Please check with your lender.
         For fixed rate loans, if interest rates are on the decline to more than what you fixed your loan at,
          you will be paying more interest than if you were on a variable rate.
         Fixed rate loans usually have high break/exit fees if you wish to payout the loan early.
         There may be costs associated in consolidating your debts as you may incur fees from terminating
          your existing debt and in establishing your new loan.
         Loan consolidation can increase your total interest costs if you make smaller repayments over a
          longer time. The interest rate on your new loan may also be higher than your existing loan/s.
         By using your home equity to pay out your personal non deductible debt may put your house at risk
          if you take out more equity than you require.
         Increasing the amount of your loan repayment or making an additional lump sum payment to your
          loan will mean that you have loss of access to your funds unless the payments are made to an
          offset account or redraw facility.
         Application fees and stamp duty may be payable on establishment of your new loan.




The information contained in this document is general in nature only unless read in conjunction with the Statement of Advice provided
by your adviser. Matrix Planning Solutions Limited, in preparing this document, does not take into account your financial situation and
objectives. You should not act on the information without receiving a Statement of Advice. Version 1.0
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