Many Australians find themselves struggling with large amounts of debt with no way to comfortably manage it. An unexpected change in income, emergency, relationship breakdown or other unforeseen event can cause severe financial stress.
Below are popular debt relief strategies for addressing debt.
What It Is?
A service that is free and confidential, Financial Counsellors offer information and advice to help you understand your options and develop plans so that you can reduce debt and/or manage on your income.
True financial counselling is independent from creditors and lenders i.e. Providers may be charity organisations, certain government departments, and some community centres.
Replacing your current mortgage with a new mortgage. The new loan is large enough to pay out your old loan as well as your other debts. You then have just one creditor and one regular repayment.
Refinancing can be done through your existing lender or a new lender.
A legal contract negotiated between you and your creditor/s with the help of an Administrator. A Debt Agreement can happen when both you and the creditor agree that you cannot pay all of the existing debt. Instead, you agree that you will repay a part of your debt through regular instalments within a set period. Once the reduce debt has been repaid, you are released from the balance of that debt.
This option may be used by people who can no longer afford to pay all of their debt, but who wish to avoid bankruptcy.
Similar to a debt agreement, but without the same legal force. It does not involve an Administrator, instead you negotiate with your creditors yourself, or with help, to work out a solution to make your debt more manageable. This might mean you agree to things like a longer period to pay off the debt, a reduced interest rate or a reduction in the debt itself.
A legal process where a person who cannot pay their debt hands control of their finances to a legally appointed Trustee. Bankruptcy protects you from creditors and releases some of the debts that you cannot pay.
There are many consequences to bankruptcy including a loss of assets and a loss of control of your finances.
Devising your own solution to manage and discharge your debts.
Examples include developing a budget, a debt repayment plan, and negotiating directly with creditors.
When it comes to debt relief many don’t realise that there are numerous reduction strategies available and that many may qualify for multiple solutions. There’s more to debt relief than balance transfers and debt consolidation loans. Having success with paying down debt comfortably is identifying which strategy works best for your situation and expectations.
The impact to credit depends on the type of debt relief option used. When speaking to any debt solutions provider, be sure to ask about credit implications prior to signing up. In certain instance the initial impact may be negative but will improve once the solution is complete.
Debt relief is the process of reviewing a persons financial situation (debt type & cash flow) and then identifying the best strategy to manage and remove the debt.
Its simply the restructuring of debt into a more manageable situation. There are numerous options available as outlined above.
The government does provide a range of debt relief resource. Below are some of the different types of assistance available.
In Australia there are numerous debt solutions provider. Identifying a provider that works for you requires a bit of due diligence. Below are quick tips to help narrow down options.