Finding yourself unable to pay your debts each month will not only destroy your credit rating but it can wreak havoc on your mental health as well. The stress and anxiety that emerge from poor financial health are well-known to too many people these days. When bills are piling up despite your best efforts to stay organized and work hard, help can be hard to find.
There is hope in these situations, however. Debt relief is a process of removing either part or the entirety of your debt in specific cases. If you are having trouble paying back your lenders, debt relief may be a viable solution to help you get out of the spiral of debt. However, while there are obvious advantages to this process, debt relief does come with some caveats.
Let’s look a little more closely at what debt relief is and when it can be used effectively.
What Is Debt Relief?
Debt relief involves the elimination of part or all of your existing debts. In Australia, debt relief can take the form of a debt agreement where you agree with a creditor to pay an amount that is affordable for you but less than the current outstanding debt. This usually involves a third party to facilitate the negotiations. Once you and the creditor have agreed on a new amount owing, this amount will form the basis of a new agreement that you will have to repay.
Debt relief can also take other forms, some of which do not directly affect the amount you owe to your creditors. For example, in Australia, you can seek financial counselling with a professional. This service is free to use and can help you plan and budget more appropriately and the financial professional will give you advice on what to do in your individual financial situation.
Bankruptcy is the most extreme form of debt relief wherein your unsecured debts are forgiven. The effects of bankruptcy are severe for your financial future, so only consider this as a last resort.
Have Your Tried Other Options?
Before heading down the debt relief route, it is worthwhile to consider all of your other options. This is because most explicit debt relief agreements, such as when your amount owing is reduced, can reduce your credit score. While this may not matter to you in the moment, this can have a dramatic impact on your ability to borrow money in the future.
If it is manageable given the nature of your household, you may even consider taking on an additional part-time job for the purpose of paying back your debts. If this is not possible for you, maybe it is time to consider cutting back on unnecessary expenses such as meals out at restaurants or luxury goods.
Debt consolidation is also another viable route for those with many debts outstanding with several creditors. This involves taking out a single large loan from a trusted financial provider that can immediately pay back all of your debts at once. Afterwards, you will only have a single loan to worry about each month and usually at a much more reasonable interest rate and repayment schedule.
Have Patience And Stay Afloat
Barring a lottery win or a sudden windfall from a relative, it is never a quick process to rid yourself of large amounts of debt. However, by being patient and working persistently to pay back what you owe, you will slowly but surely emerge into better financial health. By reading this, you are already taking the first steps towards working your way back into the black. For more advice, contact a professional in your area to determine the best option for your individual situation.