I sometimes get contacted from people seeking advice on their debt. They are at various levels of default with finance institutions. It’s heartbreaking to hear, but it’s not an area I provide advice on; plus I don’t want my fee to add to their financial difficulties. This blog article offers some pointers on debt management though.
First, there is the National Debt Helpline. They offer free, independent advice. The ‘independent advice’ means that they aren’t there to sell you something (such as bundling all your debt into a new loan), but instead provide you solid advice, independent of any conflicts. You can contact them on 1800 007 007. If you are behind on your repayments and worried about your financial future, call them now.
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Pay off Debt
If you just know that things are getting a little out of control and that you should be doing better, consider the following:
When you are deeply indebted, deciding which route to take can be a tough decision. This is the first hard decision you must take towards freedom. Do not incur a new debt to pay off an existing debt.
Do a Budget.
Cornish Wealth Management offers an excellent budget planner for your free use. Download it, fill it in and document where your money is going. It is only then that you can see where improvements can be made.
Tackle your debts.
List down all your debts and the interest rates. Generally the higher rates will be for credit cards, then personal loans, then car loans and then your mortgage. Focus on the higher interest rate debt first. You should prioritise your debts and try and pay them first if you can.
Allocate excess cash to reduce debt.
Make reducing debt your number one priority. The funds might come from an extra shift at work, a tax refund, winnings, inheritance. Put the extra cash towards reducing debt. Make it your sole focus.
Financial Hardship Assistance
If you do not think you can sort things out by yourself, then you will need to ask for financial hardship assistance. There is nothing wrong with seeking help; it is the smart thing to do.
Most big companies have financial hardship staff who can talk with you about your situation and work out how the company can work with you to sort things out with your debt management. Options may include pausing loan repayments and paying debt off in installments. You should visit Financial Rights Legal Centre who offer advice and advocacy for consumers in distress. Financial Rights Legal Centre provide a free template letter to use when you want to request hardship variation on a consumer loan or product.
If your loan is with a bank then you should visit the Australian Banking Association website. They provide the contact details for all the banks so you can find out about their individual relief packages.
Most companies are not going to just give you favourable loan terms unless they know why you are experiencing financial difficulties. You will need to explain what has led to the financial difficulty (loss of job, separation, illness etc) and provide some form of proof. It is advisable to also know what level of payments you can afford, and a free budget planner can help you work that out.
Small Business Help
As a small business in can sometimes feel you are all by yourself. This is not always the case though. If you are in financial hardship then this website is for you. Small business financial counsellors are qualified professionals who provide debt management information and advice to small business owners and sole traders in difficulty. They can help with advice such as repayment arrangements with suppliers as well as information on the implications for directors who have guaranteed business loans.
Free Legal Advice
Unfortunately sometimes bad debts progress to legal action and you may be taken to court because you owe money. The most important thing to do is not to ignore the legal letters. I know it is tempting, but the problem will not go away no matter how much you wish it does. It is highly unlikely that you can afford a lawyer, so fortunately there is some free legal advice available.
Legal Aid is a great service. Sometimes you get actual one-on-one legal advice free of charge, and sometimes you get telephone/virtual advice. They have a lot of free brochures and publications, covering a range of topics, that are very handy. Each State has their own Legal Aid operation, and you can find yours here – https://info.australia.gov.au/information-and-services/public-safety-and-law/legal-aid. Obviously not everyone can get a free or low-cost lawyer, and so there are ‘means and merits tests’ to ascertain how much, if any, assistance you are eligible for.
Community Legal Centres
Community Legal Centres provide a range of services. This includes credit and debt management, but also tenancy and housing support. There are multiple locations around Australia, and you can find a list of them on this webpage – https://clcs.org.au/findlegalhelp.
If you are in crisis and don’t have the money for basics such as food, you are not alone. It may feel like it, but you’re not. Australia is a caring country and there are tens of thousands of Australians helping those in need every week. Please don’t be too proud to ask for help when you need it – we all need help at some time in our lives.
There are numerous charities around the country. Salvation Army (13 72 58) and St Vincent de Paul Society (13 18 12) are two of the bigger well known ones. Pretty much any local church will be happy to assist as well. They should be aware of the local “soup kitchens” where food is provided throughout the week as well as other relevant services for those in extreme need of assistance.
Centrelink offer a “crisis payment” as well as a range of other services to help with debt management. It is definitely worthwhile to check out this webpage – https://www.servicesaustralia.gov.au/individuals/subjects/crisis-and-special-help
DSS Grants Service Directory
The Department of Social Services provides a database of organisations which are currently being funded to provide services to those in need. The database can be found here – https://serviceproviders.dss.gov.au/ .
Is this a symptom of other issues?
Whilst this is probably only applicable in a small percentage of cases, addictions can cause debt management problems.
First, an active addiction may have caused the debt problem in the first place:
- redirecting money from where it should be going (rent, food) to where it shouldn’t be going (drugs, alcohol, gambling), and/or
- loss of job due to unreliability stemming from an active addiction.
Second, the massive stress of financial difficulties may cause people to increase their use of ‘unhelpful coping mechanisms’ in an effort to avoid dealing with life on life’s terms.
If this is you, or your partner, then there is some good news. There is help available, and this could be the rock bottom required for you or your partner to seek it.
No matter your story, difficulty or how bad things currently are – it will pass.