This week has brought lots of discussion in our team about the position of lending and plausible exit strategies when it comes to dealing with debt.
The discussion has brought lots of different scenarios, circumstances and situations. The team thought it was great to share with everyone on what was discussed around debts.
The first thing that was mentioned on how different each case in personal or business debts is. We often say when talking to clients “Debt solutions is not a one size that fits all”. It is completely true. Everyone has a different situation and a different set of circumstances. So, it is hard to tell anyone what to do. The best option is to contact an expert and get them to do an assessment to understand the custom solution for them (Armada do this completely FREE #justsaying).
The best way is to look at the solutions and explain the good and the bad of each. Please remember, this information is not a way not to discuss your case with an expert. This will only outline the solutions and it is recommended you take the time to call an expert.
Lending options – Short term loans (payday loans), Personal Loans, Credit Card and borrowing from family
This is the first thing people think of when in debt. How can I borrow more to satisfy my debts. The key here is to think of your own income and expenditure (outgoings). If you can’t afford to repay your existing debts as and when they land, then getting a larger loan to service the smaller loans is not a smart thing to do. The interest and penalties dont get smaller, they get bigger and you get a longer loan period.
Short Term Loans or Payday loans: These are just a ticking time bomb. Most charge an interest rate that is so high it will give anyone a nose bleed. You are looking anywhere from 20% to 50% interest based on the duration of the loan. This means if you get a loan for $5000 you could owe $2500 on top of the loan amount. In the experience of the team at Armada, most of our clients are in debt because of these types of loans. They spiral out of control very quickly and they cannot be pulled back. In addition to this if you have a lender who is classed as payday lender, no big bank will look at you for most of their lending products. This means if you are thinking of trying to get a finance or a debt consolidation loan and you have a prior payday loan, you may be declined.
Royal Commission – So everyone knows that there was a Royal Commission into the processes of major lending institutions. This has had NEGATIVE result on the ability of lending institutions to just accept new lending applications. Then add the Coronavirus to it and lending is really tough. This was the general feeling in our team meeting when many of the Armada team have just been denied car finance.
If you have solid income, which is tough during the current COVID19 crisis, and you have a strong positive uncommitted income after all your essential outgoings are paid then you do have a 12 month option. This will apply to any credit card debts you may have. You can transfer all your credit card debts into a 0% transfer with other credit card lenders. Most of the big lenders do this. The trick is to get everything paid off by month 11. This is not a good option if you have 1 credit card and all you other debts are suppliers, finance or personal loans.
Debt Agreement or Part 9’s
At Armada we feel that Debt Agreements get a tough time, when they are a very good product for dealing with personal debt. These are great for people who have a positive uncommitted income (income minus essential outgoings) and they are COMMITTED to getting their debt under control.
How do they work? They are quite simple and very effective. You do an assessment and an expert (team member) will go through your debts, income and outgoings and see what your uncommitted income is. In the assessment, the team member will try to complete a balancing act with what you owe to your creditors and what you can afford. The team member will present to you a figure that you can afford over a period of team (usually 3 – 5 years, depending on having a home loan or not). Debt Agreements are much like a debt consolidation loan WITHOUT the interest and penalties. For more info click here if you want to get a FREE assessment then click here.
In a debt agreement you are only on the National Personal Insolvency Index (NPII) for a period of 5 years. Then you are removed from the NPII. In short, you will start to rebuild your score from this point. The best option is to contact an expert and get them to do an assessment to understand the custom solution for them. For more info click here if you want to get a FREE assessment then click here.
Bankruptcy
Again, Bankruptcy gets a really hard deal from a lot of people. They see it as a black mark against you and people avoid it like the plague. In reality, Bankruptcy is a very good product when you have no other options available. If you have debts and you have no income to pay them, then bankruptcy is a very good option. Doing nothing is NOT an option. The best way to explain Bankruptcy is like pressing RESET on the your debts and starting from zero. Imagine the build up of all the stress that debt brings, the worry, scared to answer the phone and it just stops. That is bankruptcy in a nutshell. Again, it is not all positives as it is any formal debt solution. You do have consequences.
In bankruptcy you are on the National Personal Insolvency Index (NPII) permanently. You will start to rebuild your score from this point, but it will be at a much slower rate than a debt agreement. The best option is to contact an expert and get them to do an assessment to understand the custom solution for them. For more info click here if you want to get a FREE assessment then click here.
Credit Score – To be totally honest, if you are in arrears or falling behind in payments, your credit score will be in a poor position. Credit Scores are like a wall, they fall down, but you can rebuild them. The biggest issue facing anyone who is reading this, is to just focus on stopping the debts getting worse. If you dont act quick, then you reduce the amount of solutions you can qualify for. Will it stop you for gaining finance? It all depends on who you are applying with. All lenders have their own set of application standards, so like debt it isn’t a one size that fits all.
THE FINAL WORD – We all make mistakes and get caught out from time to time. This is life and we have to learn from all we have done. Imagine if you had an opportunity to right a mistake you would. Debt solutions is no difference. You will have consequences and that is the lesson being applied. Many powerful people have been bankrupt before and have gone on to be very successful. The best one that comes to mind is Sir Richard Branson (owner of the Virgin brand). Debt solutions is not a death sentence, but living with debt is. The longer you leave the debt situation, the stress and anxiety increases and could affect mental health. Do something today and speak with an expert. At Armada we are proud at what we do. We are a family business and built on family values. We will give you the honest solution, even if it isn’t what you want to hear. We do that because we know what you are going through and we know how good your life will be after the debt solution is in place. Armada offer a FREE ASSESSMENT to every client. This is done with NO OBLIGATION. If you want to get a FREE assessment then just click here.