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With interest rates on the rise, many households have debt levels that are becoming unmanageable, leading to missed repayments and bad credit ratings. In worse-case scenarios some individuals even face bankruptcy. What can be done?
Debt consolidation loans
There are a plethora of finance businesses on the market now offering debt consolidation loans to people with bad credit ratings. Some of the companies offering credit repair assistance or debt consolidation loans include NAB, Commonwealth Bank and Bluestone as well as Fox Symes and Associates, the Australian Lending Centre and Debt Escape.
While consolidating your debts can seem like a way out of the quagmire, ironically many finance agents attach extremely high interest rates to their loan products – because you are now considered a high risk client. However, choosing your debt consolidation loan wisely can help bring your finances back under control.
Personal loans
The much-touted method of debt consolidation is to take out a personal loan. Personal loans often have a much lower interest rate than credit cards or finance schemes available through many retailers, making repayments more comfortable – and your losses smaller. Common providers of personal loans for the purpose of debt consolidation include NAB and Commonwealth Bank (CommBank).
If you are confident in managing your financial affairs then you may not need the help of an expert credit repairer. With a bit of personal admin and a number of phone calls to your creditors explaining your situation you will soon be feeling much more comfortable about your debt and making regular repayments into one personal, hopefully low interest, loan.
Credit repair professionals & debt counselling
However, if your debts have been outstanding for some time and your creditors are becoming more aggressive, or your home is at risk, then the assistance of a professional finance agent may be required. The agent, such as Fox Symes, will be able to act as an intermediary, reassure your creditors, arrange your loans and balance transfers and generally get you set up to tackle your debt over an agreed timeframe. Professional agents may also have some additional tricks up their sleeves to assist with judgements, collection notices, clear outs and fraud or identity theft. They should also be able to advise you about whether or not you will need to re-finance your mortgage.
Clearing your debt - the first step
Be clear, however, there is no quick fix for spiralling debt. A methodical approach is the one and only way to repair your credit rating and dig yourself out of a deep financial hole. Looking for additional sources of income such as part time work, selling consumer items that have held their value, and down-grading your car and using the money to pay off some of your loan, are all practical ways you can get the debt under control. Debt counselling may also be of assistance.
Failing to take action however is a recipe for disaster. The Government website for consumers, FIDO, part of the Australian Securities and Investment Commission, has useful advice to help get you started.