That sparkling credit card cured my worries and down I was on the shopping streets of Sydney. There was not any item that I could not buy and this made me very happy and filled with joy.

Now I sit on the chair with a cup of tea, stare at that $100 bill and a painting that I bought using the credit card thinking that was it really worth it. The overdraft facility on my debit card always pushed me extra mile to choose the $4.99 instead of the $2.99. Today life stands still. The clock keeps ticking and my phone never stops ringing.

I can’t bare the pain; the voice on the other side has stolen my sleep & the warm blanket from my bare body! The question comes to my mind of how to survive and who will help.

We at Debt Negotiators come across these stories every day,  these stories is what keeps us going and drives us, please talk to us and let us know if your debts are getting out of control, call 1300 351 008 and speak to our friendly advisors who can help and guide you to a better future.

According to the courier mail, Australia owes more than $36 billion on their credit cards and this debt is growing at a rapid rate by the day. This works out to be roughly $4757 per cardholder. With the average credit card rate of interest at roughly 18%, it is the most expensive debt one can get into.

With the rate of interest and an average debt of $4757, an individual  making only minimum monthly payments will roughly take close to 48 years to be free from credit card debt and in the process paying roughly $13000 in interest charges to be credit card debt free which is for every statistics a very very long time.

How to get out of the crisis:

• Get a debt consolidation loan from the bank or credit union you have a history with, this will enable you to get a lower rate of interest on your debt. Such a loan usually lasts between 5 to 7 years.

• Mortgage Refinance: If you have available equity in the house, try and get your home loan refinance either with the same lender you are with or a competitive lender, this equity will help you pay of that credit card debt and save you on interest charges.

• Say no to credit card limit increments every time it is offered by the bank or credit union.

• Credit Card balance transfer: This is another effective way of reducing the interest rate charges on the credit cards, usually a financial institution offers to transfer the balances of your credit cards to a new credit card with interest charges on the balance at 0% or minimal for a year or less, this will help pay the credit card principal amount quickly.

• Try and pay more than your minimum monthly payment which will enable you to pay off the balance quicker and reduce the interest

• Speak to Debt Negotiators at 1300 351 008 and one of your friendly advisor will be there to help you go through the best options that are available to you. Deal with your debts today as tomorrow might be too late.

What is a credit report?

Your Credit Report is a mini database of information about you and the financial activities involving you. The information contains in a credit file includes your name, addresses, credit enquiries, your employment, defaults, court judgments, any alias etc.

Why is a healthy Credit report so important in today’s world?

At numerous times, we face a situation where we always do the things the right way but the outcome is not in our favor. An example of that can be a situation where an old phone bill that was sent to the old address due to an error and is now listed on your credit file thereby hampering your prospects of a home or a personal loan.

Whenever you apply for any credit be it over the phone, internet or through a bank, there is every chance that the details are passed and checked with credit reporting agencies for any blemishes.

If there is a default or judgment that is listed on your credit file, then there is a good chance of rejection on securing credit. The defaults or judgments if listed can stay for up to 7 years thereby reducing drastically any chance of getting a loan from any major institution. This will then affect the interest you pay on the loan that you can access in the circumstances where your credit file is hampered.

We take an example from our previous article “your credit score”, the person A with a score of 300 due to a default on the credit file can avail a personal loan at 30% per annum, and similarly the person D can get it at 14.5%. So $25000 loan can cost the two:

Name                                    Score                     Interest Paid (Over 5 years)                        Total Amount Paid                          

Person A                              300                         $19026                                                                  $44026

Person D                              900                         $10292                                                                  $35292

Just fixing the credit rating can save you $8734 as interest charges over 5 years.

Can I fix my credit file by paying regularly?

Unfortunately Australia is one of the countries that follows a “Negative Listing Rule”, that means only negative entries are recorded and not positive ones.

Who can help?

Debt Negotiators consists of a team of consumer advocates which works for and with the consumer to bring justice to the client who find themselves in an unfair situation. We specialize in removing any default that is unfair, disputable or made it to your credit file due to an error.

To obtain a free assessment quote “fix your credit file” and speak to one of our friendly staff at 1300 351 008.

 We live in the world of Credit Ratings otherwise named as Credit Scoring; everyone is rated for credit worthiness in this World, from Countries to individuals.

 Providing credit and repaying the debt always takes into account the credit worthiness of an entity. You are more likely to get credit from a Bank if your credit worthiness is high.

 Veda Advantage introduced VedaScore from 1^st August 2011 – A credit risk management tool which assists credit providers to know and better analyze the individual score of a particular client. What it essentially does is that it simulates the information of a client into a single score thereby helping the decision making of credit providers using a threshold. For example a credit provider like a Bank will only provide credit cards to clients only with a score over 800 out of the required 1200. What it means for them is that the client is less risky for a particular bank to deal with.

 The changes to scoring is essential not only to protect the credit providers but extremely important under the current legislation changes following the GFC, every Credit Provider in Australia needs to  comply with responsible lending legislative requirements under the National Consumer Credit Protection Act (NCCP).

 Another important significance is the impact of the score on the interest rates, anyone with a low score will be more likely to be termed as high risk client thereby a perfect candidate for a high interest bearing product in comparison to a client with high scoring client. The major difference is the availability of credit providers, for example Person E with a score of 1100 there are 30 credit providers to choose from whereas for a Person A with a score of 300 there are 3. The more you got to choose from the better deal you will have.

  To end this discussion, I want to present you with a simple yet realistic data:-

 If we look at the number of lenders corresponding to your score, with a low score, there are not many oppurtunities available and the ones that are available is very expensive.

To do a free assessment and see if you can get help to stay out of the debt trap, call 1300 351 008 and one of our friendly advisors can guide you through.

To do a Debt Agreement the most important test is Insolvency test.

Insolvency test – There are no clear rules as to who is insolvent, an individual can be insolvent when analyzed by one financial advisor to the other. The rule of thumb to identify someone who is insolvent is their inability to pay the bills or debts when it falls due. The individual is also insolvent when it is accessing other credit facilities to pay the bills on time an example is using credit cards cash advance to pay for another credit cards minimum balance often known as Cash flow insolvent.

Once insolvency is justified, the following preconditions exist before doing a Debt Agreement (Ref: http://www.itsa.gov.au):

· The individual should not be subjected to any administration under the Bankruptcy Act for the last 10 years. This is done through a check at National Personal Insolvency Index (NPII) using Debtors name, DOB and any other alias.

 ·The individual cannot propose a debt agreement if the unsecured debts including any shortfall between a secured debt and the value of the security are more than $94530.80 as on Jan, 2012.

 ·The individual cannot propose a debt agreement if the total equity or divisible property more than $94530.80 as on Jan, 2012.

 ·The individual cannot propose a debt agreement if the after tax income for the year is more than $70898.10 works out approximately $1363.43 per week after tax as on Jan, 2012.

What happens if I cannot do a Debt Agreement?

Individuals who are not eligible to do a Debt Agreement have access to bankruptcy or Part X where their affairs will be investigated by a trustee.

To do a free assessment on the eligibility to propose a Debt Agreement or see if Debt Agreement can help you be Debt Free, call 1300 351 008 and one of our friendly advisors can guide you through.

With a good credit ratings and history with bank, a bit of equity in the property, one should look no further than consolidating into a home loan, this way the interest you will be paying is lot cheaper than your average credit card or a personal loan interest rate.

An individual with a bad credit rating or have no way of getting help from any sources including friends and family should look at something like a Debt agreement to pay off the unsecured debts in a manner that is not just affordable but absolutely feasible to one’s budget. A Debt Agreement is a stage before bankruptcy and helps avoid bankruptcy and with other limitation that comes with bankruptcy. A Debt Agreement will combine all your unsecured debts into one and will allow you within your budget to pay the debts off over 3 to 5 years.

Although there are advantages that comes with a Debt Agreement such as paying off the debts based on your affordability (at many instances it is even less than your minimum payments on your credit cards which one cannot afford), the debts are written off at the end of the term of a Debt Agreement. Creditors will not call, harass or even send letters during the tenure of the Debt agreement. The only thing one should be worried about is to maintain one single payment based on the individual’s affordability.

There is a drawback that comes with a Debt agreement, the inability of an individual to borrow money whilst in the Debt agreement. It will be listed on the credit file for 7 years, once the debt agreement is completed, it will be reflected on the credit file.

Debt Agreement can work as a blessing in disguise for someone who is going nowhere with his or her debts but wants to get on top of the debts and have realistic goal of even saving some money to secure his or her own future.

Speak to one of our friendly advisors and get a free assessment. Quote Debt Agreement and call 1300 351 008

These so called high interest traps are well executed for a common citizen to understand. The details of the loan are not properly explained and the emphasis is almost always on the repayments.

Facts:

These high interest loans do nothing but put the consumer in a worse position then it already is in. A typical consumer for these high interest products is someone with a low or moderate but regular income, someone who is struggling to keep up with day to day expenses like rent, grocery or utility bills and living on pay to pay day. This however, only leads to making these consumers who are already facing financial distress to the brink of a more severe financial hardship or even bankruptcies at worst cases.

How pay day loan works:

There are varieties of ways to apply for a payday loan, popular amongst those are, visiting the offices or shops personally set up by the lenders in different jurisdictions, applying it online or even getting one through the phone. These loans are often quick, easy and a fast way to get holds of cash and also requires minimal paperwork.

The lenders typically use some sort of direct debit arrangement to make sure the repayments are automatically deducted from your salary account on its due date. This due date is usually the pay date. So, for the consumers who are already on a minimal income faces even further reductions on their earnings, leaving them with no options but to refinance the loan. So, the loan that once started only for a month or so, as in most cases end up being a long term debt.

What are my options?

• Speak to one of our friendly advisors and get a free assessment. Quote Debt Trap and call 1300 351 008

• Visit informative websites set up by various consumer groups and financial counseling organizations to help people who are trapped in this kind of situation – www.debttrap.org.au

• Window shopping for the loans – If payday loan is the only options for you and you firmly believe that you will pay it off in a very short span of time, then do shop around for the best available option. There are varieties of lenders out there to compare.

• If borrowing to pay towards debt such as Credit cards, try finding how a balance transfer can help you.

• Speak to a family member to help you out in the hard times, if it’s short term, explain the situation and tell them the disadvantages of getting into a payday loan trap.

• Open a high interest savings account for future uncertainties that you should not touch too often, put whatever deposit you can afford to, remember every little helps.

• Try speaking to your own bank and see if they can help you with a low rate loan on the basis of your history with them.

• Try getting an overdraft facility if you are living on pay day to pay day.

Banks and lenders will generally structure a home loan over 25 or 30 years. This makes it affordable to pay off for the “average’ person but it comes at a cost….. and that is a “lot of interest” paid to the financial institution over a person’s lifetime.

As an example, a home loan of say $300,000 on a 30 year term at a 6.45% interest.

Repayments will be approximately $1886 per month and the total Interest paid will be $379,086 during the lifetime of the loan.

So the total paid for a $300,000 home loan will be a whopping $679,086 which is basically buying 2 homes!

The only consolation is that the home will rise in value over time to cover that.

Remedies

The amount of interest paid can be reduced by a few methods:

1. Get a loan with an offset account (attached to the home loan) – which means, keeping any extra funds in the offset account to reduce interest charges

2. Make repayments weekly or fortnightly as opposed to monthly (remember interested is calculated daily so it can be a big saving over time)

3. Make extra repayments when possible e.g. tax returns, bonuses or the best method is regular extra repayments

As an example: Jim and Melissa have a home loan for $300,000. Their repayments are $1995 per month. If they pay $2195 per month (an additional $50 per week) they will save over $116,000 in interest over the term of the loan and 7 years in repayments! If the interest rates do move up, the additional $200 per month will save them even more!

If you do need further assistance or help with your current Debt Situation, give Debt Negotiators a call on 1300 351 008 and we can help you to consolidate and pay off these debts with one easy payment or point you in the right direction.