A second bond over your property can essentially be used for anything you wish to use it for but is most often used to add rooms, renovate, install paving or fencing. Typically people use their second bond to improve their homes but what we are seeing more and more of is people using the money from their second bond to settle existing debts and reduce their debt repayments. This is commonly known as debt consolidation
The reason people are able to use their second bond for anything or as a debt consolidation tool is that when you apply for a second bond, the bank values your property at current values and if there is an increase in value and the credit department is satisfied that you will be able to repay the increased bond amount, then they will give you the money.
If your application is turned turned down due to the amount of debt you currently have and your intention is to repay that debt with the money from the second bond and effectively reduce your monthly debt repayments, it makes sense that the bank should grant the second bond. In this case you need to prepare a file of all of the debt that want to settle with the second bond and do a spreadsheet showing the principle amount, monthly fees, interest rate and monthly interest charges and the capital repayment amount, giving you a total for each short term debt. Make an appointment with the bond originator or your bank and present the file and spreadsheet to them as a way of motivating the approval of the second bond.
When seeking loans from banks it is very important to show them that you are willing and able to repay the loan, are in control of your finances and are taking control of your financial destiny. Getting a second bond can give an indebted family a second chance and the money should be used very wisely.
If you have ever been given the opportunity to settle bedt and effectively been allowed to breathe again by using your second bond as a debt reduction tool, you will know the value of reducing the capital amount with every spare penny that you have, just in case you might need a cash injection in the future. We just never know what could occur, a family member might need help, you may be retrenched or want to start a new business or your child may need to go overseas to compete and chase their dreams. having access to cash at any time from your second bond could just be what makes it all possible.