Falling behind in the payment of your secured loans? Perhaps you car loan, your home loan or some other secured form of finance? While there is scope to consolidate unsecured debts in order to reduce payments or get a cheaper rate on your loan, little is available for borrowers who need help with reducing their secured debts.
The difference between secured and unsecured debts as you probably appreciate, is that if you fail to make timely payments the lender can repossess the asset. Therefore you have little ground for negotiating. You may try to negotiate debt down with a credit card provider or your bank where yo obtained your personal loan – however your secured lender has no reason to negotiate. They know that they can have their money any time, just by selling the asset. Their money is protected. Therefore if you are struggling to maintain your secured debts in order, take care not to lose the asset.
The best way to reduce your secured debt is by selling something in order to pay down your debts. This can have an instant impact and is a very effective debt reduction strategy. Sometimes in trying to holding on to too many assets you end up doing yourself a disfavor – the cost can be too high.
Perhaps selling the new car, paying down the loan and buying a cheaper car is a strategy worth investigating.
Deleveraging can save you from bankruptcy.
Providing that your credit history is still in order, and the income levels are good, it may be possible to refinance your current mortgages, car loans etc for a better deal. It can be worth investigating. Once you fall into arrears this door will essentially close. While refinance may still be possible the costs will not justify the refinance.
See if there is scope to rent out your house or some rooms in your house in order to help you maintain mortgage repayments.
You are within your rights to contact your lender and request that they invoke their hardship provisions to help you with loan repayments over some months. This can not be a long term arrangement. However all lenders are required by law to offer special consideration to borrowers who fall upon hard times. You may need to explain what is the strategy that you are looking to implement to regain control in the longer term. By contacting your lender first before default notices start rolling in, you also protect your credit history.
If you are at risk of losing your home, you may be able to gain early access to your savings in your superannuation. This is a process that s administered by the department of human services and will only be considered on compassionate grounds.
Ultimately, if all else fails it is best that you sell your assets yourself before the lender repossesses and sells. If the later occurs there is likely to be a lot less left over for you to keep as repossession and mortgagee sales add a lot to the admin costs of the lender.
Posted in: debt help