Do you have a problem with unsecured debts and you are not sure where to go and what to do? Are you not able to keep up with set repayments due to ill health, loss of job, divorce, gambling or any other problem?
There are a number of possible solutions that could ease or fully fix your current problems. In trying to identify the best debt solution in your circumstances it is worth considering the following:
Are you working?
If you are working you may be able to approach your creditors and negotiate with them a special payment arrangement to help you through your troubled times. If you are not working but are looking for work and expect to find a job shortly, you may ask for a payment variation or a repayment holiday while you are looking for work. Providing your financial difficulties are temporary you may be able to negotiate alternative payment terms for a period of time with your creditors to allow you to catch up on payments and get back on your feet. t is important that you stick to the arrangement that you negotiate, if you do not then any trust they hold in your word will be gone and future negotiations will have little chance of success.
If you have no other assets to borrow against you may also qualify for a formal debt agreement, where a debt professional will negotiate down your unsecured debts with your creditors to help you afford your repayments. To qualify for this you need to be working. This arrangement will affect your credit history but does have the advantage of helping you to fully pay out your debts without incurring penalty interest.
Is there equity in your home?
Equity is the difference between your home value and the mortgage. For example if your home is worth $300,000 and your mortgage is $150,000 – your equity in your property is 50% or $150,000. Providing you are working and can qualify for a mortgage refinance you could try to consolidate your other debts into your mortgage. If your mortgage is at 80% or more of the value of your home, this solution is unlikely to offer the required results. You may need to incur the extra costs of LMI (loan Mortgage Insurance) and probably will not have sufficient equity left to consolidate. Most lenders will not allow refinance beyond 85%-90% of the home value. If you are in a low doc or a bad credit home loan – the limit is at 80%.
Are your debts secured ?
If your debts are secured it is very difficult to negotiate with the lender. If you tell them that you are unable to repay your loan they can simply repossess the security asset (house or car) and sell it to recoup their money. Providing your credit history is still clean, you may try to refinance your secured loan to a cheaper lender in order to reduce your set repayments or ask the current lender to extend your loan term in order to reduce periodic repayments.