If you are one of many Australians carrying tens of thousands of dollars in unsecured debts, you require an urgent consolidation solution. Sometimes these are harder to find than it may appear.
Huge unsecured debts will drain your income leaving you little to live on. One solution may be to refinance unsecured debts into a single secured loan – secured by a property for example. If you are not a home owner, perhaps your parents or family will be willing to assist. They can take the loan on your behalf and allow you to repay it. If you are a home owner with equity – you need to urgently consolidate your unsecured debts into your mortgage.
If you are not able to offer any real estate security for debt consolidation and you currently have a history of bad credit you may wish to negotiate your unsecured debts down with your lender. There are three main options here:
- Informal negotiation – you can contact your creditor and attempt to reduce your monthly repayments to a level you are able to comfortably afford. Explain your position and you may be surprised at the results. If you end up in bankruptcy your creditor may receive nothing at all. Therefore many will go a long way to prevent such a situation.
- Formal Debt Agreement (Part 9 under the bankruptcy act of Australia)
Debt Agreements are an alternative to declaring bankruptcy. There is less impact on your credit history and you may be able to save your home. Debt Agreements help people in severe debt (over $8,000 in unsecured debts) to overcome financial hardship. A Part 9 Debt Agreement combines all existing debts into one consolidated debt.
- Bankruptcy – this should be your last option.