Help with Alternatives to Debt Consolidation

Terms like bankruptcy, formal debt agreement and debt consolidation are intimidating. If you’re confused by these sorts of terms, take some solace from the fact that you’re not alone. Not only do these words describe complex financial processes, they also come with some serious consequences.

Living under financial stress and pressure makes it even more difficult to process new information and select a debt strategy in a time of crisis. With so much conflicting information about debt relief available to the public, it’s no wonder that many people elect to ignore their money troubles. Unfortunately, however, money troubles rarely, if ever, simply disappear.

Ways to reduce your debt. Consolidate, declare bankruptcy, enter a formal debt agreement? What are my options?

MyBudget offers free, independent advice about getting on top of debt. To consolidate is just one of many options.

It 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.

Our advice is free and independent, which means that we explore all of your options. We make a recommendation based on your specific needs. The roads out of debt, therefore, are as varied as our clients’ situations.

Debt consolidate may not be the best option for you.

Many people believe the only way to relieve their debt is to consolidate their loans. This misconception is often fuelled by advertising slogans like “get out of debt—consolidate and save!” It’s important to remember that there’s more than one way to get out of debt. Consolidate your debt is just one option. It can work well in the right circumstances, but it’s not always the best solution.

Technically, debt consolidation doesn’t get rid of debt. It consolidates numerous debts into one loan. Debt consolidation is designed to lower your overall cost of repayments by combining your high interest rate loans (credit cards, unsecured consumer debt, car loans etc) into one loan that has a lower interest rate. Unfortunately, for some people the required repayments are still too high for them to service.

Despite the numerous letters of offer you might receive from lenders to “eliminate your debt—consolidate your loans today!”, not everybody qualifies for debt consolidation. Lenders usually require borrowers to have an asset to secure the consolidation loan. This is usually a house or other real estate. You must also be able to demonstrate that you can afford the loan repayments.

In most cases, debt consolidation involves refinancing your house to pay off your credit card and consumer debt. Consolidation sounds simple and sensible, right? Pay off your consumer debt, consolidate your loans into one payment, and have more money left over at the end of the month. Unfortunately, it’s not always that easy. It’s common to observe that a cycle of debt consolidation loans can actually lead to increased financial hardship.

Since the global financial crisis, many banks have tightened their lending rules making it even harder for people to obtain an unsecured debt solutions loan that’s large enough to cover their needs.

Look beyond debt consolidate loans. MyBudget offers alternatives that work.

There are two types of debt agreements. One is a formal arrangement, known as a Part 9 Debt Agreement. It is a formal legal contract entered into by you and your creditors.

Part 9 Debt Agreements were added to the Bankruptcy Act in 1996 to assist low income earners to repay unmanageable debt in an affordable fashion. The agreement represents a compromise between you and your creditors.

You must remember, however, that a Part 9 Debt Agreement does not eliminate your debt—it simply aims to provide more affordable payment terms. The consequences of a formal debt agreement are also 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. Your ability to obtain credit for seven years will be severely impaired.

Reduce your repayments without the cost of a debt consolidate loan or formal debt agreement.

The second type of debt agreement is an informal debt agreement. In many instances, MyBudget is able to negotiate fairer, more affordable terms with creditors. Our vast experience in debt negotiation means that we know what sorts of terms are achievable.

Most banks and creditors have a hardship department that specifically deals with people who are struggling to make repayments due to financial difficulties. Each institution varies in the degree of leniency they are willing to approve, but in many instances, we can negotiate for interest rate and repayment reductions or even arrange for payments to cease for a period of time.
This type of arrangement can be extremely helpful, particularly if your situation is temporary and a period of relief will assist you to get back on track. It's important to remember, however, that informal arrangements are generally only short-term solutions. You will need to resume the original payment schedule once the agreed period of leniency has expired.

One of the prime advantages of an informal debt agreement is that it gives you an opportunity to get on top of your finances without affecting your credit rating.

Some of the situations MyBudget can negotiate on your behalf include:

• Apply to reduce your payments for a period of time until you get back on track.
• Arrange a moratorium period (payment break) offering short term relief from your financial commitments.
• Stop or reduce the interest being charged to you.
• Apply for a loan variation.
• Capitalise the arrears on your debt so they are added to the end of the loan period.
• Pay off your debt over a longer period of time at a more affordable rate to you.

Thousands of MyBudget clients have paid their way out of debt without taking out new debt consolidate loans, entering into formal debt agreements or further compromising their credit rating. The chances are good that you can, too.

Why is MyBudget’s approach so successful?

It 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.

Our advice is free and independent, which means that we explore all of your options. We make a recommendation based on your specific needs. The roads out of debt, therefore, are as varied as our clients’ situations.

Approximately 97 percent all of the people who approach MyBudget concerned about insolvency and unmanageable debt, will see that they are able to achieve their financial goals without the need for a debt consolidate loan or a formal debt agreement.

MyBudget helped Sean and Lynda avoid a debt consolidate loan. We can help you, too.

MyBudget changed Sean and Lynda’s lives forever by helping them take control of their finances without having to take out more loans. Having paid down their debts, the couple are now excited to watching their savings growing.

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.