How to get on top of Bad Debt
Posted July 28th, 2009 and last modified July 12th, 2011
Debt consolidation may be a first option for those swimming in debt, but one should be cautious when choosing a debt consolidation offer.
If you want to avoid bad debt it might be worthwhile to refuse combination loans and even interest reductions according to Bina Brown. In our haste to find the best solutions for debt consolidation many Australians are choosing the wrong vehicle, and get themselves further into debt at the same time.
Opportunistic times to kill bad debt once and for all.
With interest rates being at their lowest in decades and a general curb in people’s spending habits, now is a great time to look at your own debt to see whether there might be a better way for debt consolidation.
According to Reserve Bank data, consumers are owing six times as much debt today compared to the last 18-years.
Most people are concerned about the unstable job market, and many wonder whether they will be able to pay back their loans or mortgages.
Be wary of dangerous solutions for debt consolidation.
The problem with economic downturns is that they attract a lot of dangerous solutions to fix ones bad debt. These solutions are often full of hidden costs, terms, and traps to suck the consumer further into debt instead of helping him to clear it up.
At the very least you want to be cautious how you approach these offers. Many of them actually add further debt to your existing bad debt, making it sheer impossible to get a hold on your financial situation. To make matters worse, loan terms are often extended.
Debt consolidation needs to be understood and monitored with the help of your accountant or financial advisor. If you pay off several debts at once, then the monthly payment will be reduced every time you finalise a particular loan, making it easier to keep up with payments as time goes by. The best way to handle debt consolidation is to then add the surplus money to the loan payments of the outstanding debt which will speed up your repayment cycle overall.
Home owners with existing equity in their home can also choose a home equity loan (HELOC loan,) to pay off other debt. With the current low interest rates this might actually be the cheaper option opposed to expensive personal loan repayments.
When people are stuck financially it is often hard for them to ask for help. But if you want to solve your debt related issues, it is of essence to act fast and speak with your lender first to see whether you can come to a suitable arrangement for the both of you.
Once a debt-collection company has been called it is often too late to negotiate. Carolyn Bond, chief executive of the Consumer Action Law Centre said: “If a company doesn’t respond appropriately, you can go to a relevant consumer tribunal, in the case of NSW and Victoria, and they will help determine what might be a reasonable solution. It doesn’t mean you are going to get whatever deal you want but if you are upfront about being in financial hardship, you are in a better position to be able to work out something agreeable.”
Consumers are protected by law in regards to debt collectors and how they approach you. If they threaten you with goods seizures, or fines, they are acting unlawfully towards you.
Garry Rothman, senior financial counsellor with Broadmeadow Uniting Care, the welfare arm of the Uniting Church, said that bankruptcies are becoming increasingly worrisome due to the high numbers we face. He said: “Unfortunately, a lot of people come to see us after trying to juggle things for a long time and can’t stand it any longer. “
“Often it is a change of circumstances like illness, unemployment or marriage separation that makes it all impossible. Where we see people on low incomes and high debt and they are not able to service that debt and it impacts on their health, in many cases bankruptcy is the best option.”
He urges people with unmanageable debt to come forward, asking for help before it is too late for them. It is very much possible to manage bad debt and find solution with debt consolidation for just about anyone. But the secret lies in fast action and communication between you and your lender.
Order a copy of your credit file
Receive email alerts whenever specific changes occur on your credit file for 12 months. You also receive a copy of your credit file despatched within one working day..
Receive your credit file with information on:
- Details of consumer credit enquiries
- Details of overdue consumer credit accounts
- Commercial credit enquiries
- Details of overdue commercial credit accounts
- Bankruptcy & Court Judgements
- Writs & Summons
- Information on your current relationship with a credit provider
Image source: BookMama
Check out today's featured offers:
| Westpac Low Rate | Citibank Clear Platinum | Qantas AMEX Discovery | ANZ Platinum |
 |
 |
 |
 |
0% p.a. for 6 months on purchases & balance transfers |
2.9% p.a. for 12 months |
$0 annual fee Up to 10,000 Bonus QFF Points |
0% p.a. for 6 months on purchases & balance transfers |
|
|
|
|
Subscribe to our newsletter and get "The Ultimate Guide to Balance Transfers"
If You Like This Post...
Get all the latest deals, guides and loopholes go in Credit Card Finder's free bi-monthly email. Don't miss out - join the thousands who get it emailed!
Ask A Question