Speed up your journey to wealth

Noel Whittaker
Noel Whittaker

ONE of the best ways to speed up your journey on the road to wealth is to eliminate costly bank interest.  However, there are only two ways to pay a loan back faster – find a lower interest rate or increase your payments. 

A recent query from a reader shows how a clever use of both those strategies can make a major difference to your financial situation. 

The question went “I am married with two teenage children, with a single income of $165,000.  We have $220,000 left to pay off our house which is valued at $600,000.  We would like to buy a new car for $45,000, and upgrade our kitchen at a cost of $20,000.  Should I redraw from my home loan for the car and kitchen to ensure the lowest interest rate?  We currently pay $3,000 off our home loan per month.”

They are already in a good position because their current repayments will have the loan paid off in just eight years.  My advice was to pretend that the $65,000 was being paid on a personal loan over five years at 10%.  This would require repayments of $1,381 a month. 

Having done these calculations, they could fund the car purchase and the renovations by drawing down on their existing home loan which would increase it to $285,000.  If they then increased their present repayments by $1,381 a month to $4381 a month, and kept them up, they would be debt free in less than seven years. 

This example is in stark contrast to those who consolidate their personal loans with their housing loan just to save monthly payments.  They may enjoy short term relief but the price is a huge increase in the interest they pay as they extend their personal loans to 20 years or more. 

Noel Whittakeris a director of Whittaker Macnaught Pty Ltd.  His advice is general in nature and readers should seek their own professional advice before making any financial decisions.  His email is

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