Financial Hardship and You

When you fall onto hard times your whole world feels as though it is falling apart. Whether you have lost a job, fallen ill, split from your partner or sustained an injury, a number of different circumstances can leave you unable to work, or pay your debts.

If you were ever to find yourself in a similar circumstance you could declare financial hardship.

Financial hardship is an official way to let your creditors know you need some relief from your debts until you get back on your feet again.

Many banks and financial institutions offer financial hardship to their customers as well as utility companies like phone and internet providers.

Every company has a different policy when it comes to assessing and approving financial hardship for their customers and while some companies can be understanding, others can appear quite harsh.

What is financial hardship?

Successfully claiming financial hardship means different things for different companies. Generally, you will be granted some sort of relief from your debts for a certain period of time. The benefits could include an extended deadline on your late repayment or a period of up to three months where you won't have to pay interest and/or fees.

 

Am I Eligible?

Simply falling behind with your repayments isn't enough to declare financial hardship. You need to prove your circumstances have temporarily changed and you are unable to make your repayment because of it.

What else can I do?

Your circumstances might have permanently changed and you will no longer be able to pay the debt you originally took on. Or perhaps your bank knocked back your financial hardship application. Don't panic. There are other debt relief strategies you can employ to help get you back on track.

Debtstroyer Agreement

A Debtstroyer Agreement is an informal debt agreement between you and your creditors. It allows the professionals at Debt Rescue to negotiate a payment agreement which is more suitable to your lifestyle. For more information on a Debtstroyer Agreement visit www.debtstroyer.com.au

Debt Agreements explained

With financial stress affecting millions of Australian households, a growing number of people were turning to debt agreements as a responsible and informed way of turning their lives around.

Personal debt management company Debt Rescue currently has Debt Agreements in place with clients across Australia.

Debt Rescue operations manager Rachael Witton said the success rate with “rescuing” people from debt through Debt Agreements was significant, with the company spending 4-5 years with each client on average from the initial assessment to the completion of the Debt Agreement..

 “Debt Agreements are just one tool in the armoury of easing financial stress and are often one of the last resorts,’’ Ms Witton said.

“However, when a client is entirely informed about their options they can be a highly effective solution for avoiding bankruptcy and getting out of the financial black hole,’’ Ms Witton said.

Simply put, a formal Debt Agreement is a negotiated agreement between a debtor and a creditor governed by Federal legislation. There are also informal Debt Agreements which are merely a contractual arrangement between debtors and creditors available to clients.

Ms Witton said Debt Agreements provided a low cost alternative to bankruptcy and has fewer limitations on people’s future in the majority of cases.

Other benefits include:

• Unsecured debts are paid through one regular weekly repayment which is more affordable and easier to manage, tailored to the clients’ budget.
• No more interest is charged once your creditors approve the Debt Agreement Proposal
• Once the Debt Agreement is lodged all recovery proceedings and garnishees cease – this means no more harassing phone calls, and your financial and emotional stress is eased.
• An experienced team negotiates with your creditors for you
• A registered and qualified administration service manages all payments to your creditors on a regular basis.

Ms Witton said Debt Rescue carefully assessed each clients’ individual situations and only suggested Debt Agreements if there were no other options.

Often a client’s debt problems could be successfully resolved with less formal strategies including professional assistance with budgeting, money management and direct negotiations with lenders.

Card Conditions: The difference between sinking or swimming

This morning I dropped my car in for its major 100,000km service and to get four brand new tyres put on.

I know it doesn't sound like much to blog about, but something is going to happen when I pick my car up at 5:15 this afternoon.

I am going to use my first credit card for the first time.
You might be thinking so what? big deal, thousands of Aussies use credit cards everyday.

But it is a big deal for me. Working in a debt management company I am exposed to all kinds of inside knowledge about the dangers of having and using a credit card.

In more cases than not, a credit card is the major culprit behind so much stress and sadness brought on by debt.

So with all this inside knowledge why would I want to expose myself to a dreaded credit card debt? The honest answer is, I can't afford not to.

The Truth

My car is now due for it's 100,00km service and four new tyres. Looking at my budget, it would take me two months to save enough money for this rather costly expense. But as I drive 40 minutes each way for work five days a week, my poor car can't wait it out for another two months.

The Deal

The only way I allowed myself to apply for a credit card was to abide by a few conditions devised specifically to keep me from abusing the card and going into debt. From what I have seen in my job, I was able to pin point a few aspects of the 'spending with a credit card' process which seemed to keep getting people in trouble. So hopefully sticking to these rules will help me afford my immediate expense without develooping a nasty spending habit and an even nastier debt.

The Soap Box

I thought to myself, if these rules can help me stay out of debt, hopefully they can help several others in my position do the same. So I am going to share them with you here. Please keep in mind that I am by no means a financial specialist, just a young Aussie adult trying to figure out my finances with a little bit of help on the way.

Card Conditions

1. My purpose for this card was to pay for a car service. With this purpose in mind I set out to find a card which best suited my situation. In this case, the card I went for came with a 6 month interest free term, no anual account fees and a reasonable interest rate. I could have opted for a card with a lower interest rate, but they generally have higher fees. Because I am only going to be using my card for my car purchase, I will pay it off within the interest free period so the higher interest rate doesn't come into play here. If you are going to use your credit card frequently, it might be worth paying minimal anual fees for a reduced interest rate.

Lesson: Think about how you are going to use your card BEFORE you apply for it.

2. I rang my auto technician and got a quote for the job ahead. Knowing how much my purchase was going to be I was able to start factoring the repayments into my budget straight away. Knowing I could afford this service in two months time, I divided the cost of the service into a weekly amount over two months. It took 10 working days for my card to arrive, so I have already saved up two weeks worth of repayments.

Lesson: Ignore the minimum repayments. Pay off your credit card debt as soon as you are able. Factor an amount you can afford into your weekly budget and stick to it.

3. Once I finish paying off this purchase I am going to continue to pay my weekly repayments into a savings account until I have paid for my service once over. This way, next time I need to have my car serviced I will have the money when I need it.

Lesson: Savings accounts are much more user friendly than credit cards.

4. Once I have finished with this card I am going to hide it in a draw for six months. In that time I am going to save as much as I can into an emergency fund. After six months I will have enough in my emergency fund to cover any unexpected costs so I will cut up my card.

Lesson: Credit Cards cause emergencies, they don't resolve them.

Preparing for the worst

Another 700 job losses were announced in an Australian company today with unemployment statists as gloomy as ever.

When people take on a loan, make a purhcase on their credit card, or even spend their savings on a well deserved holiday, they never suspect to lose their job, fall ill or sustain an injury the very next day.

A financial back-up plan is an essential part of life, yet so few Aussies are covered in their time of need.

Financial experts agree everyone should have the equivelant of three month's worth of wages squirrelled away for a rainy day. But by the time people have repaid their debts, put money in a savings account and bought everyday expenses, it could take years to accumulate that much money.

If you can't find the time or the means to set aside a back-up fund, you should seriously consider income protection insurance.

Income protection insurance will cover up to 75% or more of your income should anything hinder your ability to work. Income protection insurance can generally cost more than life insurance, but premiums for income protection insurance are tax deductible.

Each different company will offer a different product so it is important to shop around for a policy that is right for you.

When you are looking at different providers, check the definitions of disability, to ensure you are covered for circumstances that are more likely to happen in your work place. For example Tradies will have different risks in their workplace than an administration clerk. Also check the definition of income, to ensure you will receive an amount enough to cover your living expenses. Different policies also cover different additional benefits, such as hospital benefits and nursing care.

Always read the Product Disclosure Document to know exactly what will be included or excluded from your policy.

Income prtection insurance may also have an agreed value, a benefit period and a waiting period which vary across different providers.

It might seem like just another expense at the time, but it is better to pay a small weekly cost and be covered when you can't work than to try to live for possibly weeks on end without an income.

Whether it is purchasing an insurance policy or saving for an emergency fund, you should take precautions to ensure you have a back-up plan.

Slack Saving Excuses

Most debt is caused by people losing control of their finances, whether their circumstances change or they just didn’t develop proper money management skills to begin with.

 If this sounds like you, don’t panic. It is just as easy to get out of debt by slowly changing your money management skills over time.
 

One great habit to develop is your ability to save money. The more money you save of your own, the less you will need to borrow, thus reducing your need for debt in the first place.

Everybody wants to save money, but only a select few get it right. We have come up with the most common slack savings excuses and given you a way to overcome them.

“By the time I get through the week, there is no money left to save”

Let me guess, you don’t have a budget do you? I didn’t think so. If you are only scrapping through the week and hanging on for your next pay day, you need to sit down and seriously reconsider your expenses. Where is all your money going? That is the question you need to be asking yourself. For the next month, write down all your expenses. At the end of the month you will be surprised by the money you are wasting. Look at the expenses you could cut back on or eliminate and make a concerted effort to put some money aside for savings each pay day, that way, you won’t be tempted to spend it through the week.

“I am paying off too many debts to be able to save”

If you are managing to pay your debts with just enough money left over to live, you are headed down a slippery slope. If you don’t have enough money left over to save, you probably won’t have enough of a reserve fund to cover your debts should anything happen such as illness, injury or job loss. It’s time you spoke to a personal debt management specialist, such as Debt Rescue, to see how you can get on top of your debts before it is too late. You might find a simple consolidation will give you enough room to move to be able to money aside in case of an emergency, and you could be out of debt sooner.

“I try to save, but I just end up spending the money I put away”

The reason we save is so we can spend it eventually, the trick is to set a goal. If you have something specific in mind, like a holiday, it is easy to know how much to aim for. But if you are saving for the sake of saving you can set some smaller goals, like for every $1000 you save, you get to spend $100 on something special, like dinner in a fancy restaurant or an expensive new bag. This will encourage you to continue to save and the reward will put a stop to splurge spending.

“I would like to save, but my partner won’t stick to the budget”

The key to being successful in finance is to hold yourself accountable. While it is important to have support from your spouse and family, you shouldn’t let their actions hinder your ability to be financially responsible. If you have a joint account with someone who is making it hard for you to save, take affirmative action. Open a high-interest account without a redraw facility so once your savings have been deposited you won’t have access to them for a set period of time. Don’t keep this account a secret from your partner, let them know how it works and encourage them to put their savings into it as well. Whether they decide to participate or not, you know your savings are safe and sound.

For more advice visit www.debtrescue.com.au or call 1800 00 3328.  

Jump on the bandwagon

Recent reports show fewer Aussies are falling behind with their loan repayments and in December the RBA set the cash rate to its lowest point since 1990. All indicators are pointing towards recovery for the Australian economy as things become easier.

If you have watched on in disbeleif at all these positive financial stories on the news, it's time you jumped on the bandwagon and join in.

You can be part of the good news story with a little bit of help and guidance. Here are three key actions to your success:

1. If something isn't working for you, change it. Interest rates are the lowest they have been since 1990, only ever matched once during the GFC. The only problem is, banks aren't passing the reduced rate on to their customers. If you are struggling to keep up with repayments ona loan with incredibly high interest, shop around and find a lender with competetive rates. The early repayment fees might just be worth refinancing if you are going to save thousands in interest over the life of the loan.

2. Know your enemy. Have an idea of how much debt you owe and really start to think about where your money goes. You can't manage your finances properly if you don't know how far it needs to spread.

3. Develop a plan. Organise a budget and set yourself some goals. For example, calculate how much you can afford to put towards your credit card, figure out how long it will take to pay off with those repayments and set that date as your goal.

You don't need to go it alone either. Personal Debt Management companies such as Debt Rescue are on hand to offer advice and positive solutions to your debt.

Keep the Hell Hounds at Bay

Borrowing money allows us to afford things we otherwise wouldn't be able to buy. A house, a car, or even a new dress or the weekly groceries.
At the time, loans and credit cards can seem like a saving grace, swooping in to help us in our time of need.

But there's a catch: you need to pay that money back. So what will come to the rescue when the people you usually borrow money off are the ones chasing you for money? More credit cards, more lenders, or maybe a friends or family member could come to your aid? But then you would owe them money too.

When debt turns bad, life gets harder and the stress and torment of your looming debt can infiltrate every aspect of your life. Your relationships, your job and even your health.

But when debt turns bad, you don't have to let it run it's course. You can take action and turn your situation around. Personal Debt Management companies, such as Debt Rescue can help you see the options available to you and implement a strategy to get you out of debt.

One of the most stressful things about bad debt are the constant string of phone calls and letters from your creditors or debt collectors. The harassing behaviour displayed by the people in these industries is designed to pressure you into paying your bills regardless of whether you can afford them or not.

More often than not, it's time, more than pressure which will help you pay your outstanding bills and Debt Rescue can help you get it.

By engaging our services to help you get out of debt, whether it is through debt consolidation, refinancing, Debt Agreements or even bankruptcy, you can get the creditors off your back.

Once you have officially employed a debt management specialist to help you, you can refer all your creditors to the professionals who deal with this kind of thing on a daily basis to act on your behalf.

Depending on the positive solution you decide to undertake, you are given an opportunity to repay your debts under your terms, not the banks.

For more help with your debt call Debt Rescue on 1800 00 3328 or visit www.debtrescue.com.au.

A little bit of Resolve

Millions of Aussies rang in the New Year with the best intentions to turn their lives around. The first day of the 2013 was inspiring enough to excite change and commitment across the country. Whether it was to get into shape, find a new job, quit smoking or pay off debts, on January 1, 2013 the country's resolutions were a sure thing.

So here we are on January 3, 2013 and more than half the country has already abandoned their resolutions. Those who vowed to get into shape have snuck the last Christmas mince pie from the fridge. Smokers have already had two absolute LAST smokes, and people in debt have applied for another credit card to help pay off their Christmas spending spree.

The best thing about New Year Resolutions is that we have the whole year to do something about it. Rome wasn't built in a day, and we can't change a lifetime of habits overnight, so if you have encountered a minor set back on your resolution, don't be discouraged.

Being successful in your resolution simply requires a plan. Twelve months worth of small obstacles for you to overcome to eventually reach your goal.

For example, smokers can begin the year by cutting back. Then they can plan to trial different methods of quitting until they find one to suit them. Once they have, they must commit to their plan until they quit.

If you want a new job, think about what is making you unhappy in your current one, brainstorm a job you would like to get, improve your resume, advance your skill set and set out on a job hunt to find one.

Setting smaller goals will help you feel like you are getting places with your resolution.

If you are in debt, you need to take a deep breath and step back from your situation. You might feel like your whole world is falling down around you and there is just no way out. Well there is.

Firstly, you need to know exactly how much you owe and to who. Tally up the outstanding amounts on all your debts including your credit cards. Depending on how much you owe, there are different solutions available to you.

You could simply require a strict budget to get back on track, or you could need to engage in a Debt Agreement, Consolidate your loans, refinance or even declare bankruptcy.

The second thing you need to do is ask for help. The professional Case Managers at Debt Rescue can help you determine the best course of action for you.

You aren't alone in our struggle, whether you ask a doctor, a personal trainer or debt management professionals for help.

Good luck on your journey to your new and improved life. I just know you will be proud of yourself by 2014.