Education on Bad Debt Consolidation

Most people don’t mean to get into financial trouble. One month their debt is under control and the next it’s unmanageable. This is because debt has the habit of snowballing and life has the habit of changing without warning. For example, a job loss, reduced income, illness or relationship breakdown can throw a person’s finances into turmoil very quickly.

Debt and financial hardship can be so stressful and debilitating that it’s difficult to know where to turn and how to get back on track. Many times, a bad debt consolidation loan looks like the only option. MyBudget is here to help you make an educated decision about whether a bad debt consolidation loan is the right solution for you.

Is a bad debt consolidation loan my only option?

If you’re behind on loan or credit card payments or have outstanding unpaid bills, it’s very likely that there are already default listings on your credit file. Unfortunately, this will limit your ability to obtain a bad debt consolidation loan.

There are lenders who specialise in lending to people with poor credit. However, the bad debt consolidation products they offer usually come with higher than average interest rates. In the long-term, high interest rates can cost you thousands of dollars and have a negative impact on your cash flow. They can also make the repayments on a bad debt consolidation loan unaffordable for many people.

This is why we strongly advise you to seek independent advice before entering into a bad debt consolidation loan. MyBudget is here to help you consider all of your options. Because we don’t only specialise in loan products or formal debt agreements, we give you insight into your entire financial situation and explore all of your options to get out of debt and start saving.

If I don’t qualify for a bad debt consolidation loan, is a formal debt agreement my best option?

There are a lot of companies out there suggesting they can “cut your debt in half.” Beware of those sorts of promises. If it sounds too good to be true, it probably is.

Unless you are willing to enter into a Part 9 Debt Agreement or bankruptcy—both of which have serious long-term consequences—no creditor is obligated to reduce what you owe to them.

A Part 9 Debt Agreement can be an effective method of bad debt consolidation in some circumstances. A formal debt agreement will freeze the interest being charged to you and provide a set repayment figure for a set period of time, usually up to five years. A formal debt agreement also protects you from legal action from your creditors during that period.

You must keep in mind, however, that the consequences of a formal debt agreement are serious and far-reaching. Formal debt agreements are regulated by the federal government. A formal debt agreement will appear on your credit file for seven years and your name will be listed on the National Personal Insolvency Index forever. In fact, the consequences are not dissimilar to bankruptcy.

Before deciding to enter into a formal debt agreement, you must be confident that the company you’re dealing with has your best interests at heart. MyBudget can help you assess if a formal debt agreement is the right option for you.

If a formal debt agreement turns out to be in your best interest, we can assist you through the entire process. MyBudget is a registered debt agreement provider with the Insolvency Trustee of Australia (ITSA). We can usually provide you with immediate stress relief by communicating with your creditors on your behalf.

Why is MyBudget so successful at reducing debt?

MyBudget’s approach to debt reduction starts with a free consultation where we will assess your financial situation in detail. As well as analysing your income and expenses, we closely examine your debt situation. Even if you decide not to proceed with MyBudget, your customised budget plan and our recommendations are yours to keep for free.

MyBudget will examine all of your options. In 97 percent of cases, we are able to help our clients reduce their debt without entering into a formal debt agreement or bankruptcy. And, in the majority of cases, we are able to show our clients how to reduce their debt without needing further credit or a bad debt consolidation loan.

Explore all the alternatives to bad debt consolidation.

MyBudget clients consistently demonstrate that it’s possible to pay your way out of debt without entering into bad debt consolidation. For example, it’s possible that we could help to relieve your debt by negotiating informal debt agreements with your creditors on your behalf. This strategy would help you to avoid the consequences of personal insolvency or the costs of a bad debt consolidation loan.

Our expert negotiators can communicate with your creditors on your behalf and negotiate realistic payment plans with them—repayments based on what you can afford. Our vast experience in debt negotiation means that we know what sorts of terms are achievable. In many instances, we can negotiate for interest rate and repayment reductions or even arrange for payments to cease for a period of time while you get back on track.

Creditors will often agree to lenient terms when they understand that MyBudget is helping to manage your finances. This is because they respect and trust MyBudget’s track record for helping people pay their bills on time and live within a workable budget (read Jody’s story).

MyBudget will also help you start saving immediately. Your savings may be modest in the beginning, but over time they will increase. The accumulating funds will act as a safety net in case of emergencies or rainy days. In the long-term, you’ll be able to save for the things you dream of.

MyBudget helped Jem with unmanageable debt and bad credit. We can help you, too.

Jem recovered from unmanageable debt and bad credit without taking a bad debt consolidation loan or entering into a formal debt agreement. Since joining MyBudget, he hasn’t had the phone or internet disconnected and he’s finally able to enjoy an active social life.

Find the best option for you. MyBudget’s advice is independent, confidential and free.

A free consultation with MyBudget is an opportunity to gain deep insights into your financial situation and all of your options. Even if you decide not to become a MyBudget client, the budget plan we prepare for you is yours to keep at no charge.

Change doesn’t have to be difficult. The first step is always the hardest, but in this case it’s as simple as making a phone call. Take the step today to get out of debt and start saving. It’ll be the best decision you’ve ever made.