Unfortunately, unless you win the lottery, there is usually no quick fix to get yourself out of debt. But the important thing is to take steps to change your financial future. With the right advice, it is possible to pick the best debt help for you and put a sensible plan in place to get your finances back under control again.
At Fix Bad Credit, our mission is your financial freedom. One of our debt help experts will carefully assess your personal and financial situation so we can tailor a personalised debt help package to best meet your goals. Your personalised debt help package will contain options to help you take back control of your debt and start you on your journey to financial freedom.
What is an informal debt arrangement?
If you’re having difficulty making your repayments, you may want to try to reach an informal agreement with your creditors. Whilst informal debt help are not legally binding, they are likely to have fewer serious consequences than formal debt arrangements.
An informal debt arrangement involves entering into an informal payment plan with your creditor(s) to enable you to pay your debts off over time – potentially deferring payments until you get back on your feet or making your payments more management and affordable.
The negotiated new payment plan could include paying your debts in a single, lower lump sum or continuing with a different repayment plan involving one, or a combination, of the following:
- A Debt Moratorium, also known as a payment holiday or payment deferral, to either stop or reduce your payments and interest over a short period of time (usually between 3 to 12 months) to enable you to get back on your feet or to put other arrangements in place.
- Debt Consolidation – by bringing your existing multiple debts together into one single new loan, subject to a single interest rate, with a single regular (usually monthly) repayment it makes managing your debts significantly easier.
- Debt Negotiation – this involves discussions with your creditors to informally renegotiate the terms of your loan, this might mean settling the debt for less than the full amount, lower interest rates, reduced fees and/or extending the length of the loan to reduce the size of your minimum payments.
- Debt Settlement – If you have access to a lump sum, a debt settlement may help. A debt settlement is an informal arrangement with your creditors that offers less than the full amount you owe in order to wipe out the debt completely.
- A longer-term informal arrangement – a long term informal arrangement can last several years and often involves reducing your minimum repayments, reducing or freezing the interest owed over the period if you need more time to get back on your feet or to put other arrangements in place.
What is a formal debt help?
Formal debt help have been developed and implemented by the Australian Government under the Bankruptcy Act 1966, to provide options for people who find themselves in situations where the debt they carry becomes unmanageable. It is important that you fully understand what you are agreeing to before signing up to them, as whilst they have benefits, there can be serious consequences. They are:
- Debt Agreement – A formal legally binding (Part IX or Part 9) Debt Agreement helps you deal with unmanageable unsecured debts such as credit cards or personal loans. Your debt will likely be reduced to an agreed amount and the remainder you will be able to pay back through affordable regular periodic or lump sum payments.
- Personal Insolvency Agreement – A Personal Insolvency Agreement is a formal, legally binding arrangement that is between you and your creditors to satisfy your debts. The arrangement could consist of a contribution of your income over a period of time or an assignment of your assets. It is the last option considered before filing for bankruptcy.
- Bankruptcy – Bankruptcy is the formal process of being declared unable to pay your debts. When you become bankrupt, you don’t have to pay most of the debts you owe.
Understanding the terms of any debt arrangement, both formal and informal, is critical before agreeing to anything. Ensure you have enough information to be able to select an option which is most favourable to you, so your financial situation isn’t impacted even further. Don’t be afraid to ask questions. If a part of the agreement or contract is unclear to you, make sure to clarify anything first before signing on the dotted line. We recommend you talk to a debt expert about your options.
For more information on what might be the best option for you, call one of Fix Bad Credit’s debt help experts on 1300 729 757. Our debt help experts can help you assess your financial situation for free and identify debt help options tailored to your specific personal financial circumstances, using their in-depth knowledge of credit law and debt processes.
Debt is one of the few stressors in life that doesn’t go away. The worry is always there, along with the feeling that there is nothing that can be done about it. Money and debt worries cause heavy emotional and mental burdens, affecting your health, your work, and your relationships. But just know you’re not alone. If you’re feeling overwhelmed by money matters, we’re here to help you find relief from your debt stress. Talking about debt can be daunting. It’s hard to know where to start or what your options are. However, you can take a small step right now by picking up the phone.