If you are not able to meet your set repayments on a loan or credit card, the first thing you should do is contact your lender. It is not an option to simply stop paying. If you have borrowed money, you have a legal responsibility to repay the money you owe.
One of the reasons why so many Australians find themselves with bad credit is that they decided not to make repayments on debt obligations they had taken on.
If you alert your lender to the problem early, you may be able to negotiate different repayments. This could involve making smaller payments but over a longer period.
If you don’t contact your lender or you can’t negotiate a solution, you may be contacted by a debt collector. If you cannot pay your debt or agree a repayment plan with the collector, possessions bought with the loan or used to secure the loan may be repossessed. You may also be sued in court for debts you owe. If the matter goes to court and you lose, you will find a judgement placed on your credit report.
If you can’t resolve your debt problems, a financial counsellor may be able to help you. A qualified financial counsellor can help you understand your finances, the causes of your financial difficulty and identify what solutions may be available and suitable for you. Financial counsellors can help you get back in control of your money – whether it’s creating effective budgets, working out manageable repayment plans, or working with your creditors by establishing a Debt Agreement.
There are several government and community services which provide free financial counselling.