Having debts that are out of control can be stressful and overwhelming. If this is the predicament that you find yourself in, do not hesitate to seek help.
If the debt problems you are having, are a temporary situation (for example, due to loss of work, where ordinarily you have a steady income), you may consider paying for financial advice to get you through this crisis, and into a better financial position in future. You can browse financial advisers on Adviser Ratings here.
Below are some actions you can take yourself, to sort out any problems you are having with debt.
Get in contact with your credit and service providers
If you find yourself struggling to stay on top of your payments for your utility bills, credit cards, or loan repayments, you need to start by speaking with your credit or service provider, before your financial problem gets even bigger.
Many companies assign hardships officers to help you work through your situation and to give you guidance on the help that may be available to you. The reasons for your trouble in making payments and the estimated amount of time your financial troubles will last is a huge factor that decides whether you can be helped.
Part of the help that you can get from hardship officers is having them work out a payment plan that you can afford, such as paying your bills through instalments or making changes to your loan repayment plans temporarily.
Struggling with Bills??
Depending on the state you are living in you may be able to apply for various rebates, concession schemes, emergency assistance or relief grants. Your service provider will be able to tell you what is available for your specific situation.
If you are receiving certain government assistance payments, you may also qualify for additional help with your bills. Below are some links that may be useful;
Utilities Allowance
https://www.humanservices.gov.au/individuals/services/centrelink/utilities-allowance
Advance Payment for Income Support
https://www.humanservices.gov.au/individuals/enablers/advance-payment/30201
Telephone Allowance
https://www.humanservices.gov.au/individuals/services/centrelink/telephone-allowance
Council Rates repayments can often be negotiated for those experiencing financial difficulty. This may be in the form of paying rates by instalments, deferring part or all the rates for a certain period. It is important to contact your council as there can be serious consequences if they are not paid on time.
Mounting Credit Card Debt
As convenient as credit cards can be, they can also be risky and expensive. It is important to do your research and read the fine print before applying for any type of credit. If you find yourself struggling with credit card debt, following one of the below strategies may help in reducing it.
- If you can’t afford to pay the closing balance, then pay more than the minimum monthly repayment. This will limit the amount of interest charged.
- If you have multiple credit cards pay down the one with the highest interest rate first, whilst maintaining the minimum repayments on the others. This will limit the overall impact of compound interest and lower the growth of the debt. Once the card with highest interest rate is paid off, work your way down to the second, adding the cash repayment from the first and so on.
- Pay off the smallest balance first. Sometimes people will get a boost from seeing a debt cleared, albeit small.
- Consolidate your credit card debt on to a lower interest rate card. Take advantage of the interest free period on balance transfers to pay off the amount owing sooner.
- Set up an automatic payment to your credit card, make it a priority.
Every little bit helps so stopping or slowing down your spending on credit cards is a step in the right direction. Simply, spend less than you earn.
Debt Consolidation
Rolling all your existing loans/debt into one is not only convenient for the service of debt but can ideally secure a lower overall interest rate. There are however a number of things that need to be considered before doing so.
Regarding debt consolidation and credit cards, consider cancelling your credit card accounts and consolidating the debt into a low-interest debt consolidation loan, so that when you are paying the loan off or once you have paid it off, you will not be tempted to use further credit via credit cards.
- The interest rate on the new loan needs to be lower than the original interest rate otherwise you are only going to make your situation worse.
- Make sure you check the length of the loan term. You may be paying a lower interest rate but if the lifetime of the loan is longer you could end paying more interest anyway.
- You need to be able to service the loan. The new terms and repayments need to be affordable.
- It can be risky. Sometimes through your consolidated loan you are given access to more credit. This may be tempting to spend more money and get further into debt.
- By turning unsecured debt such as credit cards into secured debt like your home loan, you may risk losing your biggest asset if you are unable to meet the new repayments.
- Like any loan application, do you research when looking for a lender/broker. Make sure they are licensed. You can check if a lender/broker is licensed on the ASIC Connect's Professional Registers
- Explore all your options with your current service/credit providers before taking on any more debt.
Free financial advice is available, for more information on financial counselling you can contact the National Debt Helpline via their website here.
Keep on top of your credit rating, this will affect your future borrowing power. For more information on how to find out what your credit rating is and what you can do about it, see the below link:
https://www.moneysmart.gov.au/media/400943/your-credit-report.pdf
You may be eligible for a hardship variation
A hardship variation is a change to the terms of a loan because of financial difficulties. 
Illness, unemployment or any significant changes to your financial status may leave you unable to make repayments on your credit cards or loans as you should. If this is the case, you can ask for a hardship variation from your credit provider.
These are some options that you can discuss with your lender when you want to change your repayments:
- Having your loan period extended could enable you to make repayments over a longer period
- Postponing your repayments for a certain period that you agree on with your lender
- Extending your loan period as well as postponing your repayments for a certain amount of time that you and your lender have agreed on
- Other ways in which your loan repayments can be made more affordable.
If you entered into a credit contract before March 2013, your credit provider must consider your hardship application if the amount you borrowed is less than the threshold (maximum amount allowed) that applied on the date you signed your credit contract. If you did enter into a credit contract before March 2013, for any of your credit cards, loans, utility providers, etc, then please check the thresholds shown on ASIC’s MoneySmart website, here.
Credit providers are legally obligated to respond to you after you disclose your financial problems, such as failing to pay your loans, to them. It should normally take up to 21 days for your credit provider to inform you of the outcome of your hardship variation application. In the case that you are needed to provide additional information, you are required to give them the information within the 21 days.
Debt Agreements and Bankruptcy
You need to seek professional advice before entering into either of these agreements. Both agreements can have a lasting effect on your ability to get credit in the future.
Whilst Debt Agreements are an Act of Bankruptcy, it is one of many Acts of Bankruptcy and you are not in fact bankrupt. They do have serious long-term consequences and all other options should be explored before consideration. They are a legally binding agreement between an individual/s or entity and a credit provider regarding the repayment of debt. Detailed information regarding Debt Agreements can be found on the Australian Government website, Australian Financial Security Authority here.
Bankruptcy is the legal proceeding where an individual/s or entity is declared unable to repay their debts to creditors. Like a Debt Agreement, Bankruptcy should only be considered once all other options have been explored. Seek Financial Counselling and Legal Advice before going ahead. The consequences of this can be further explained on the Australian Government website, Australian Financial Security Authority here.
For information regarding free legal advice, contact the National Association of Community Legal Centres via their website here.
Repossession of Goods
If you are unable to meet the repayments on your loan, you may be at risk of having your goods repossessed by the lender/credit provider if the loan is secured.
A secured loan is one whereby there is an asset/goods put up as security for the term of the loan. If you fall behind, this asset may be repossessed and sold by the creditor to satisfy the debt.
Before goods are repossessed, the creditor must provide a default notice. It must state what the default is, action that needs to be taken and a given time frame of 30 days to pay the overdue amount before repossession can take place.
It is important to contact your credit provider if you receive a default notice so that you can negotiate options with them. You may be able to make an alternative payment arrangement or postpone repayment while you apply for financial hardship.
The credit provider must have the court’s permission to repossess if the amount owing is less than $10,000; or less than 25% of the loan amount is owing, (whichever is the lesser).
They cannot enter your property unless they are in possession of a court order or written consent from the you.
The credit provider must send written notice of the estimated value of the goods, enforcement expenses incurred from repossession, and a statement your rights and obligations under the National Consumer Credit Code.
Goods cannot be sold within 21 days of this written notice. If the amount owing on the loan is paid within this period, the credit provider must return the goods to you. If the debt is not repaid and the goods are sold, the credit provider must then provide a written statement stating the proceeds of the sale, any costs incurred and the outstanding balance. If the proceeds from the sale of the goods is less than the amount outstanding on the loan, you are still liable for the balance.
Make Sure You Seek Help:
Free financial advice:
Free financial advice is available, for more information on financial counselling you can contact the National Debt Helpline via their website here.
Free legal advice:
For information regarding free legal advice, contact the National Association of Community Legal Centres via their website here.
Free financial complaints service:
Managing debt can be a stressful and difficult undertaking, if you are unable to reach an agreement with your credit provider, you can lodge a complaint with an External Dispute Resolution Scheme. Contact the Financial Ombudsman Service on 1800 367 287 or the Credit and Investments Ombudsman on 1800 138 422.
Free mental health services:
Lifeline
If you are feeling overwhelmed, please contact Lifeline’s 24/7 crisis support and suicide prevention hotline, on 13 11 14, now, or chat with someone online here.
Beyond Blue
Another organisation that can help you, if you are experiencing anxiety and depression, is Beyond Blue, who can provide information and support to help everyone in Australia achieve their best possible mental health. Call them on 1300 22 4636, or browse their website here.
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