Consolidate your debt without borrowing a cent

Oct 11, 2014 |

Borrowing to consolidate debts into a single new and cheaper loan is what most people think of when they consider debt consolidation. However if you are looking for a debt consolidation loan you may have realized that qualifying for such a loan is not easy. There are a lot more people in Australia who are unable to afford their current debts and need debt help, than there are people who can qualify for a debt consolidation loan.

However qualifying for a consolidation loan is not enough, you really should also make sure that the loan you are getting will actually be cheaper than your current debt arrangements. Cheaper does not always mean lower repayments, it can also be the amount that you will need to pay out to your creditors overall in full settlement of debts.

There are debt relief alternatives available to borrowers who for any one of a number of reasons are unable to qualify for a consolidation loan. These are debt solutions that will help one reduce debts or even become debt free without the need to take on a new loan.

Temporary debt relief

People who can not afford existing debt repayments because of an event that will affect then for a few weeks/months rather than long term, can qualify for debt relief without needing to take on a debt consolidation loan:

Informal Negotiation

Those who are unable to maintain debt repayments temporarily need to speak to creditors and attempt to reach an informal payment arrangement that offers some form of payment concession while they are trying to recover from whatever event has put them behind financially. If you have gone through a relationship breakdown, illness or loss of income, but expect to recover within a 2 Р3 months, do not fall into payment  arrears. Try to reach alternative payment arrangements with all creditors.

Financial Hardship

Anyone who is experiencing financial hardship should seek their lenders, service providers to invoke a special hardship arrangement to their credit facility or invoice. Most essential service providers and lenders are obliged by law to offer you special payment terms for some time if you can demonstrate that you are in financial hardship.

Long term debt relief

If your financial situation is not expected to change in the short term, then you require some long term debt relief. People who have lost some of their usually income or have accumulated unexpected debts may find it difficult qualifying for additional finance.

Debt Agreement

A debt agreement is a formal repayment arrangement with your unsecured creditors. They agree to accept reduced renegotiated payments from you in full settlement of your unsecured debts to them.

Why would any creditor agree to accept less? They may do so because you can demonstrate that you are currently and in the foreseeable future insolvent. That means you have no financial capacity to repay your debts and failing you reaching a debt agreement would need to consider bankruptcy.

Most debt agreement are signed for 3-5 years. During this time you make a single set periodic payment that is split between all your unsecured creditors.

You do not incur any interest on the outstanding unsecured debts. Signing a Debt agreement gives you immunity from debt collectors.

Personal Insolvency Agreement

Personal Insolvency Agreement works similarly to a debt agreement except it is available to people who hold more assets and have larger debts and therefore can not qualify for a debt agreement.


Bankruptcy may be a viable debt solution to people whose debts significantly exceed their assets and who have no means of repaying these debts. Bankruptcy also does not entail the person taking on any new loans. It simply results in the applicants main assets being sold to repay their debts. If there are debts which can not be repaid from the proceeds of the sale of the bankrupt’s assets, they may be partially recouped from the bankrupt’s income during bankruptcy. After bankruptcy, all pre-bankruptcy debts (with some minor exemptions) are erased and the person is able to re-start afresh.


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