Debt Consolidation Dilemma

Debt Consolidation

If you are afraid to answer you phone because debt collectors are chasing you, if you are behind in all debts and cannot catch up, if you have been declined debt consolidation assistance through your bank – there are some alternatives.

Most people who struggle with their debts find that in the process they acquire a bad credit history as their creditors will register non-payment or defaults on their credit report. As a consequence when your credit history starts going downhill, so does your ability to borrow from a bank.

Debt Negotiation

The most common solution under these circumstances is debt negotiation. For debt negotiation to be effective, creditors need to be willing to settle for a lesser amount than their outstanding balance. Debt consolidation negotiation results in you having a lesser amount to pay. As the entire process is a negotiation there may be several stages to the proceeding before a settlement plan is confirmed and documented. Generally debt negotiation is finalized with a part 9 debt agreement.

Debt Agreement

A debt agreement is a legal document which sets out your monthly repayments as agreed to by your creditors and protects you for the period of agreement from being hassled by creditors looking for their money. Although debt agreements should not be entered into lightly, they are an excellent tool for consumers who are struggling with debts and do not want to declare bankruptcy. 

Loans after Bankruptcy

If you have had to declare bankruptcy and are waiting for discharge to start borrowing again, you may be disappointed. Borrowing after bankruptcy is difficult at best and impossible at worst. If you are lucky enough to be able to offer security for the loans you are seeking, the borrowing may be possible. However even with secured loans in some cases you need to wait some months or longer before being able to qualify.

However if you would like to take out an unsecured loan your borrowing ability will be restricted to a handful of lenders offering cash loans or small loans for a few months. These loans can be very expensive with rates up to 49% p.a.

The problem with borrowing after bankruptcy is that you will find it difficult to qualify for a loan with your local bank and other traditional lenders. As long as your bankruptcy remains on your credit report it is important to try and approach lenders that specialize in bad credit loans.