How to Deal with Debt in Australia

Debt can feel like an avalanche slowly rolling down a snowy hill. Starting as a snowball of one missed credit card payment, it can grow over time into several credit card payments, missed mortgage payments, and then utility payments. With the weight bearing down upon you, it’s easy to feel crushed by the responsibility. However, looking at ways to handle debt can sometimes add to feeling overwhelmed. Below are five

Refinancing with Lower Rates

Sometimes, getting ahead of debt is the best way to deal with debt. Refinancing can help lower payments if you’re able to get a good deal on your origination fees and closing costs. If you’re already feeling the pinch of debt, you can refinance to take out additional cash. One mortgage broker in Perth notes that a cash-out refinance offers a way to borrow at a low interest rate.

Debt Consolidation

Debt consolidation involves taking out a new loan to pay off existing debts. A cash-out refinance as discussed above is one way to do this. By putting all your debts in one place, you can streamline your payments into one bill. When interest rates are low, you’ll be able to get a lower interest rate through the loan than through the individual payments which can help lower your monthly bills. For example, if you’re paying off multiple credit cards and paying high rates one each one because you fell behind in your payments, consolidating your debt into one lower interest payment can help you climb out from under the payments.

Debt Management

Debt management, although often confused with debt settlement, negotiates old payments with new payment plans instead of taking out a loan to cancel previous debts. The process usually takes 3 to 6 years to complete. First, you will work with a credit counselor to review your overall finances to create a monthly budget. Then you will plan how to pay off the debt based on your monthly payment abilities and number of accounts that need payment. Finally, you may be asked to use a direct deposit program to pay your monthly amount and then cancel all your credit cards.

Debt Settlement

Debt settlement essentially creates a way for you to negotiate dollars owed to your creditors. This is a fairly extreme option since it will hurt your credit score. While you can attempt to negotiate your debts on your own, Quantum Finance offers resources to help you find a settlement agent. Settlement agents will work with you to review your debt, income, and savings to help you determine what can be used to pay your debt. Then they will have you sign a contract for you to pay the settlement agent instead of your creditors. The money is put into escrow until you have enough to pay off the negotiated amount. After that, they attempt to negotiate a new amount with your creditors where you pay a lump sum the comes from the escrow. It’s important to have a legitimate settlement agent otherwise they may not be able to settle for you. Keep in mind, that they will take a fee from a percentage of the escrow account. If they do not negotiate well, then you are worse off because you will be further behind in your payments since you paid your money to the escrow account not the creditors.

Bankruptcy

In Australia, you have the option to present a declaration of intention to present a debtor’s petition. This gives a 21-day protection period where unsecured creditors can’t act. This acts as a probationary period pending bankruptcy. If you then want to file for bankruptcy, you can. Filing for bankruptcy covers most unsecured debts such as credit and store cards, utility bills, and medical, legal and accounting fees. Before assuming it releases all debt, make sure to check with your creditor to see if it will erase Centrelink Debts, Australian Taxation Office debts, victim of crime debts, and toll fines.

Keep in mind that there are also several debts including court imposed penalties and fines, child support and maintenance, HECS & HELP debts, and unliquidated debts.

Financial Priorities.

First things first, apparently I’m a little late to the game, but I made a Facebook fan page last night for Punch Debt In The Face (See the new widget in the sidebar on the right?). I don’t really get why that’s better than my Facebook profile page, but for some reason people tell me it is. I also don’t know why likes are important on a page, but again, someone told me they were. Would you take a moment to head on over to my new fan page and gimme a little Likey Likey. If you do, I will…well… do absolutely nothing for you. Sorry, just being honest.

Alright, on to the content…

Do you have an income? Do you have expenses? If you answered yes to either of those questions, you darn well better have some financial priorities in place.

While there are a million different things we could talk about in regards to financial priorities, I want to focus on just one. Which comes first: investing or paying down debt? Hey, speaking of…

Which came first, the chicken or the egg?

Answer: Chuck Norris.

In all seriousness, I think financial priorities are something most of us think we have figured out, but don’t always truly understand. Today I’m going to show you why investing in your 401K is often a better option than paying down high interest credit card debt.

Let’s look at an example:

Jane, makes $50,000 year. She’s 30 years old and her employer fully matches 5% of any contributions she makes to her 401K plan. Jane also has $5,000 in credit card debt, at 15%. What should Jane do, pay down the card as quick as possible, or start building up a nice little nest egg for retirement?

A 15% APR, on a $5,000 balance, means Jane will be paying about $62/month in interest. If she made nothing, but minimum payments, it would take her a little over 22 years to pay that sucker off. She’d also pay $5,729 in interest over that time resulting in a total payment just shy of $11,000. Yikes, that $5,000 original bill became a whole lot more expensive. Better pay that sucker off ASAP, right?

Now let’s examine the investing route.

Jane would be investing $208/month in her 401K if she contributed 5%. Her employer matches that and gives her another $208. If she earned a doable 6% return on this money, and never got a raise in her life, she would end up retiring at age 67 with $683,030 in her 401K. Not bad at all.

If Jane decided to postpone contributing to her 401K, she could use that $208 to make accelerated debt payments each month. But let’s not forget, that 208 number is pretax, so in reality she’d have about $175 extra to throw at her credit card. With the additional payment, Jane will now be credit card debt free in 20 months and will have only paid about $673 in interest. Sounds a heck of a lot better than the 22 years it was going to take in the first example.

Here’s where it gets interesting.

Wanna know what Jane’s 401k would look like if she didn’t start investing until after she became CC debt free? She lost nearly two years of company matching and compound interest, resulting in $596,388 in her 401K. That’s $86,642 less then if she started investing at age 30.

Guys and girls, this point is SOOOO important it can not be overlooked. It is absolutely in Jane’s best interest to start investing in her companies 401K, even though she is not debt free. If she waits until she has her credit card paid off, she loses a crap load of money. I know this seems to go against the grain. Credit card debt is evil, don’t get me wrong, but that doesn’t mean it should always be at the top of our financial priorities.

Obviously, in a perfect world you will have enough discretionary income that you can not only contribute to your retirement, but also pay down your debt quickly. I always have been, and always will be a DEBT PUNCHER, but only when it is in your best interest.

Does your employer offer a 401K match? (I’d like as many people as possible to answer this question since I’ve heard a lot of the retirement benefits in the private sector have been getting cut left and right). Are you taking full advantage of that match? If not, you’re stupid. I’m sorry, you just are. You are literally giving up FREE money. In Jane’s situation would you go the way of Dave Ramsey and still pay down your credit card first, or would you let number’s guide you and start contributing to your retirement?

p.s. Like me on Facebook, I’m desperate 🙂

Simple Steps to Manage Debt this Year

Accumulating debt is something many people do at some point in their lives. This can be a result of purchasing a house by taking out a mortgage or getting an auto loan to buy a new car. College debt is another increasingly common factor in the US.

Even small purchases can put people into debt. Using any type of credit card to make purchases of any kind can cause debt to accumulate, so anyone with any amount of debt needs to know how to manage it so that it does not get out of control. If a person has too much debt, they may spend more time juggling payments than actually paying them off. A few simple tips can go a long way to help manage your personal finances.

Make a list of what you owe.

This list will include the creditor (like a bank, a mortgage company or other lender), the total owed, required monthly payment, and the date the payment is due. Cross reference the information on your list with a statement or by logging into your account online. Analyze your list every couple of months to see where you are with any particular debts.

Pay your monthly bill on time.

The late fee for missing a payment is easily avoidable and will only add to your existing debt. You will also likely end up with higher interest payments, adding to your debt. Create a reminder or an alert on a tablet or your smartphone of when payments are due. A reminder should be at a few days before the payment is due and not on the due date. Remember to take into account when your payment will be sent and when it will be received. If you are sending a payment on a Friday night, it may not be received until Monday.

Something you may want to do is sync your smartphone and tablet so a reminder or an alert will be displayed on both devices. You may also want to schedule your payments in advance if you have this option.

Create a payment calendar for bills.

If you have certain bills that will be paid at different time of the month, a payment calendar can help to keep you on track and manage personal finances in a simple, organized way. Indicate on your calendar which bills you will need to pay with each paycheck or expected payment. Sometimes due dates for bills can possibly get changed. This might mean you need to try and adjust your payment calendar so that you do not run short of funds.

Pay more than the minimum when you can.

Paying more than the minimum payment for bills like credit cards helps keep your balance in check; if you only make the minimum payment, interest will add to the balance in time. Keep in mind that when you charge more than you pay each month, your debt will grow.

Prioritize your existing debts.

Certain debts need to be paid before others. The debt with the highest priority is typically the payment for a credit card. The credit card with the highest interest rate should be paid first (while still making at least minimum payments on all other cards, of course). A trick you can use to help decrease interest charges is to transfer balances to a lower rate card. This may be a good option for anyone who has multiple credit cards with payments at different times of the month. Another option could include making a payment on a credit card that has the highest balance.

Create an emergency fund.

Unexpected events can happen at any time, and you never know when you might need funds for something unplanned. These events could include getting let go from a job or maybe an accident that has damaged your vehicle. Try putting something like $25 or more every week into an account at any bank or credit union. After a year you will have $1300 to use as an emergency fund. If you keep adding to this fund, you will have a solid cushion for three to six months of living expenses.

Create a monthly budget.

Knowing how to set up a budget is a great way to know what you can spend each month. If this is done at an early age, managing money in the future will become that much easier. The best thing about setting a budget is that any funds left over each month can be saved or even used to make an additional debt payment.

Breathe.

Debt will not go away overnight. But having a system in place and keeping on track will allow you the joy of watching your debt decrease. Once you’re out of debt, it’s important to keep the system going to ensure that you can live without the fear of debt and can eventually achieve the financial freedom that everyone looks for.

 

 

The Best Ways to Avoid Building up an Overwhelming Student Loan Debt

Many graduates today, acquire their degrees alongside high-debt burden from unsettled student loans which can be tens of thousands of pounds. However, with a strategic approach, consistency and commitment, you can pay off your student loans faster, lower your monthly payments or avoid surplus borrowing in the first place. Below are definite ways to avoid a huge student debt profile.

Look for varsities that help you rely less on loans

Besides excellent teaching, research facilities and reputation, one critical factor that you should consider when looking for admission at colleges is the load of student debt encouraged- choosing one that does not overload their students with debts.

One way to do this is to check the statistics. Avoid schools with high default rates, which forces students to take up debts that they can’t afford. However, note that default rates may be an average stat and may not reflect the personalised financial package of individual colleges.

Make a budget

Having worked out your monthly repayment sum, the next step is to create a budget. Make sure to treat it strictly with the same commitment and discipline that you would treat other monthly bills like rent, utilities and insurance.

Pay off the loan upfront

Always pay off your minimum balance and avoid excessive default or late fee penalties. It’s a good thing that student loans don’t count on credit ratings and so don’t impact a person’s capacity to borrow in the future after graduation. However, lenders factor them in when considering a mortgage application.

Reduce your principal

Some of us might be lucky enough to find that we have some money lying around. Rather than put it towards the repayment of your student loan; pay it as part of your initial debt capital and lower the original amount. Make sure you notify your lender of this approach so that they know how to credit the extra payment.

Reduce your rate

If you have a consistent job with a fair income that is considerably higher than your total monthly repayment rate, you can refinance the high-interest student loan into a lower one and help you to pay off your debt more quickly.

Automate your payments

In addition to the peace of mind that comes with knowing that your debt profile dwindles further at the end of every month, some lenders offer extra incentives for people who want to put their repayment plans on automatic deductions from their bank accounts.

Get a job that pays your loans

You can as well look for a job that offers help in cancelling student loans. Many of the professions that have the highest loans like law, medicine and veterinary also provide students with opportunities to pay off their debts by working certain jobs.

Opportunities also exist in other fields and professions as well, like law enforcement, qualified charity organisations, social work and education. Even if it is not strictly a loan forgiveness plan, some employers offer student workers debt repayment as one of the incentives in their employment package.

 

How to improve your credit score in 5 easy steps

financial docs

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Your credit score is important, and you’ll want to protect it as best you can. With a decent credit score, you can apply for a mortgage, loan, credit card or bank account with relative ease. If a bank or lender sees a poor credit score on your file, this could affect your ability to obtain that product.

Money Saving Expert says that your credit score is more important than you might think, “Since the credit crunch started, way back in 2007, the importance of credit scoring to our financial lives has grown rapidly.”

Tip 1 – Register to Vote

If you’re not on the electoral roll, it’s unlikely you’ll get credit at all, so sign up immediately. If you aren’t eligible to vote in the UK, you could consider sending credit reference agencies proof of residency (utility bills, a UK driving licence, etc) and ask them to add a note to verify this. This should help you get credit.

Tip 2 – Meet all repayments on current loans and show how trustworthy you can be

Any forgotten or late payment gets makes a mark on your credit file. So if you have any loans to repay, make sure you meet repayments on time.

You need to amend your current spending and repayment habits and after about a year, your credit file should show a dramatic difference. Yes, it requires patience, but it is definitely achievable.

Tip 3 – Cancel unused credit and store cards

Money Saving Expert says, “If you have a range of unused credit cards and lots of available credit, it could be a good idea to cancel some of them. This lowers your available credit and should help.”

BUT, long-standing bank accounts with good credit histories can be a benefit to your credit score, so try leaving them open.

Tip 4 – Pay for insurance up front and not monthly

Monthly insurance payments can have an impact on your credit score. So, if you can pay it all in one go, try and do so.

Tip 5 – Keep personal details the same between applications

If you different job titles or phone numbers/addresses, try to use the same one on every form. It is important to be consistent. If you use different details, you might be flagged up by fraud scoring. Simply keeping some consistency can improve your credit score.

How Settlement Loans Can Help You

life preserverIt is no secret that lawsuits cost a lot of money. And unfortunately, they are needed most by people who do not have the financial support to survive otherwise. Even if you have adequate proof and the upper hand in the case, it could take months, maybe even years until the lawsuit is settled and a verdict is presented. In the meantime, people who cannot afford to pay for the legal costs of carrying on the litigation will need to look for a way to make ends meet. Fortunately, settlement loans can provide some relief.

What exactly are settlement loans?

Advance settlement loans are used by people who are active in an ongoing legal lawsuit that is bound to pay out when it settles in the future. It can be used to cover personal expenses before you receive the settlement payout. With a lawsuit loan, you will be able to pay for your basic needs, legal charges, mortgages, vehicle loans and other expenses even if you are unable to work at a job for a period of time.

Lawsuit funding companies such as Settlement Lenders Inc. offer a variety of funding options to ease the financial burden on their customers during trying times. Most of these companies allow you to pay them only after you have received your settlement amount. As the amount of payout differs from person to person, you will need to discuss with a loan expert to find out exactly how they can help you through the lawsuit process.

Are there different types of settlement loans

The amount you get from a settlement loan depends upon the type of lawsuit, the severity of your loss and the chance you have of winning the case. Some of the most popular types are car accident settlement loans, slip and fall settlement loans and inheritance loans. Regardless of the type of lawsuit funding, you will have to have retained a lawyer and have all your legal documents in place.

How a settlement loan can help you

A settlement loan can be of great help in a variety of situations. If you are injured in a car accident, you may incur medical bills, while simultaneously experiencing a loss of job due to your injuries. But bills need to be paid on time and even if you burn through your savings, it will become increasingly difficult to survive until you get the settlement amount.  A settlement loan will help you to make ends meet and participate in a legal battle without incurring serious debt.

Another situation that a settlement loan can be useful is when you are named in a person’s will. The distribution of assets is a complicated process that can take up to a year to complete. Paying back loans and other bills, on the other hand cannot wait until the assets are distributed, and a settlement loan will help reduce the financial stress that you are going through.

While choosing a settlement loan, it is vital to find a reliable service provider that will give you the right information. At www.settlementlenders.com, we believe in guiding our clients towards the settlement loans that best fit their requirements. Contact us or apply online and we will work towards providing you the financial assistance you need as soon as possible.

Get Rid Of Debt And Start From Scratch

Are you the type of person who was never properly weaned off their parents’ credit cards? Have you racked high figures on four, five, possibly even six credit cards to keep up with your luxurious lifestyle, but now all of a sudden are stuck paying for them all by yourself because you finally stepped into the adult world? Welcome. You aren’t alone by any means. Your situation isn’t even all that uncommon, if we’re being honest about how today’s society works. If this described your situation down to the teeth, know that your path to getting all of your debt consolidated starts with just one simple mouse click to www.fasttrackdebtrelief.com

Fast Track Debt Relief is a company that aims to bring together debtors who owe up to $100,000 and dedicated debt experts who can greatly help. Not only can these professionals offer general debt help, they can work with credit card companies, bill collectors, banks, and other bothersome entities on your behalf to lower and consolidate your payments. The experts at Fast Track Debt Relief have a good track record — if you look at the list of debts they’ve settled provided on their website, you see that every single customer that hired them paid, at most, 40% of the debt they owed. That’s a guaranteed 60% off, and that’s just the minimum! Upon inspection, you’ll see that some of them only paid 15 to 20 percent of what they owed!

To get your financial life back in order, you must get rid of your debt as soon as possible. Don’t hesitate to hire a professional to help you work your away around the intricacies of the debt world, where creditors can easily forward your commitment to annoying collectors known for harassing individuals. Don’t be a victim of debt, nip it in the bud as soon as possible! And when you do, you’ll be able to start your debt free living lifestyle and be able to build the life you want!