Paying off debt can often seem like an unimaginable task. However, there are solutions to stop accruing interest and calls from debt collectors. There is a range of effective strategies on offer to help you pay off your debt. These include debt minimisation and financial instruments such as: debt agreements, debt consolidation, and personalised budgeting tools.
What is a debt agreement?
A debt agreement is a legally binding arrangement between you and your creditors. In a debt agreement, your creditors agree to accept a negotiated percentage of your combined debts. This amount is based on your realistic and sustainable affordability. A Debt Agreement is governed under the Bankruptcy Act 1966 and your administrator is regulated by the Australian Financial Security Authority (AFSA).
Upon acceptance, a Debt Agreement freezes interests*, fees and charges on provable unsecured debts. This allows you to repay the debts over an extended period of time at an amount per week, fortnight, or month that you can afford.
A Debt Agreement is not a consolidation loan or agreements to borrow money.
It is important to note that the following debt cannot be paid out by a debt agreement:
- Debts obtained by fraud.
- Child Support.
- Fines, penalties or other court-administrated payments.
- Student HECS or HELP.
- Secured Debts
Still unsure about how a debt agreement works? Below are the 5 steps Credit Counsellors Australia take to formulate your debt agreement:
1. FREE Debt Assessment
The team at Credit Counsellors Australia will give you a free debt assessment, this will help them establish your financial situation so that they can be confident a debt agreement is the right solution for you.
2. Discuss your options
Not only will they inform you of the various options available, they will talk you through the pro’s and con’s of each one until you can feel confident about the decision you make.
3. Contact your creditors
Your financial consultant understands that contacting the creditors can seem daunting, so they will do it for you. Your consultant will act on your behalf and obtain the necessary information from your creditors to formulate your agreement.
4. Working with you
At Credit Counsellors Australia we will work closely with you to keep you updated on the progress of your application, and to ensure a smooth and transparent process you can feel comfortable with.
5. Finalising the agreement
Credit Counsellors Australia will then finalise the paperwork, and make sure you understand all the terms and conditions associated with a debt agreement, before having it signed by all necessary parties.
Credit Counsellors Australia Pty Ltd are here to support you and will do what we can to help you stay on track to reaching your financial freedom.
For more information surrounding the agreement, click here.
What are budgeting tools?
A budget may seem like a simple task, but coming up with a financial plan can be a difficult process and will differentiate for everyone based on incomes and expenses. Formulating a realistic budget is one of the best ways to manage your finances. People often avoid budgets because they don’t want to face what they are spending and how much money they owe; if this is the case for you it could be time to ask for help. A budget can be an individual goal or can also work well for couples sharing costs. Making a budget will help you pay off a credit card or loan, allocate money for upcoming bills and find a balance between saving and spending.
There are various resources available to help you, start by checking out this free budget planner.
For budgeting and saving tips, watch this.
Work out how long it will take you to reach your savings goal using this free calculator.
Find out how to plan a budget here.
What is debt consolidation?
Debt consolidation will leave you with a manageable monthly repayment at a lower interest rate than what your current creditors are charging. A financial consultant will assess whether or not, debt consolidation is the right solution given your specific circumstances. This option will combine your debts so you don’t have the burden of dealing with a number of different creditors. Your financial consultant will calculate the difference in interest rates to find out if this solution is the most beneficial for you long term.
Three things you should consider before signing a debt consolidation loan contract:
- Compare the interest rate, fees and charges. You want to make sure you will be paying less on your new loan by comparing the interest rate.
- Check the terms. Beware of longer loan terms.
- Make sure the company is licensed. If they are not licensed, it’s illegal.
Still feeling unsure about what a debt consolidation is? Click here.
*Subject to Legislative Terms & Conditions