Wednesday, 19 April 2023

5 questions to ask if a debt agreement is right for you

If you’re facing serious issues with your credit history and have bad debts, deciding whether or not to enter into a debt agreement is a big decision. Here’re some questions to ask yourself before you decide if this is the right solution for you.

Do you understand what a debt agreement is?

A debt agreement is a binding agreement between you and your creditors that falls under the Bankruptcy Act 1966. Under a debt agreement, your creditors agree to accept an amount of money that you can afford to pay over a set period of time to settle your debts. Once you have paid this amount your creditors cannot recover the rest of the money you owed.

 

Have you explored all of your other options?

Before you consider a debt agreement, it’s important that you’ve looked into other means of resolving your bad debts first. There are a number of options available, such as, debt consolidation, debt settlement, creditor negotiation or a moratorium, find out more about these informal debt solutions.

 

Have you sought professional help?

It’s also a good idea to seek help and information from an independent source about your options. You may wish to seek free help from a community legal centre, a financial counsellor or from a professional debt solutions company. They can offer guidance, speak to creditors on your behalf, help with budgeting, and give you information about sources of government assistance that may be available to you.

 

Do you understand what debts you’d be released from?

A debt agreement may not release you from all of your debts, depending on your personal circumstances. There are some types of debt that are not covered by a debt agreement.

 

Do you completely understand the agreement you’re considering entering into?

A debt agreement can have a serious impact on your future ability to obtain credit for a period of 5 years, so be sure that you fully understand the implications and terms..

Pros of debt agreements

• Your debts will be combined into one manageable payment. It’s easier to manage one payment instead of multiple payments.
• Debt agreements may offer lower interest rates and repayments.
• Debt agreements could help you avoid bankruptcy or loss of major assets.

Cons of debt agreements

• You will need a stable income to meet the repayment instalments for the newly consolidated loan.
• You may get further deeper into debt by being allowed to borrow more money.
• You may not be approved if you have a poor credit history.

If you’re struggling to stay on top of your debts, Credit Repair Australia can help. Talk to us about our debt solutions.