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Debt consolidation is the process of taking two or more loans and combining them into a single loan. This can help you to save money by reducing the amount of interest you pay, reduce repayment periods and improve personal cash flow. Debt consolidation can make life a little easier by giving you one easy-to-manage repayment. Debt consolidation loans can pay off your credit cards, personal loans and even your home loan. For some people debt consolidation is the best way to get out of the mess of trying to repay many different types of credit at high interest rates, and can be a solution to debt problems.
When borrowing money, the lender often requires the ‘lendee’ to mortgage the goods being purchased so they get some security, allowing them to repossess the items purchase in case the money cannot be payed back. Repossession means the person that lent the money has the right to take the item purchased in substitution for money. In addition to having the items repossessed, you must also pay the costs for repossessing them. If the goods are sold for less than the purchased price, the ‘lendee’ must pay the difference.
When the items purchased are not worth repossessing, the person that owes money may have their wages garnisheed. This means that the lender has the legal right to take a certain amount of the borrower’s wage. The percentage can range depending on the amount that the borrower owes. This may be a motivation for the borrower to repay their debts on time.
Another reason for severe financial debt may be due to over use of credit cards, especially amongst younger Australians, as they see their credit limit as more of a target rather than something to keep to a minimum.
The first thing you should do when you realise you cannot pay your debt is contact the lender and explain your situation to them. You may receive a document from them called a default notice. This states that you haven’t carried out the agreed terms of the loan and therefore you need to get legal advice because legal proceedings will be taking place. This legal advice can be from any solicitor, financial counsellor or credit organisations.
There are a number of options available to people who cannot pay their loans.
1. Pay the amount owing. Pay your debt on or before the due date stated on the default notice.
2. Negotiate a change in your repayments. A financial counsellor can help you to do this.
3. Apply for a hardship variation. Although a lender may not want to negotiate one of these, you may be eligible for one.
4. Negotiate a postponement of repossession. You can reschedule the date on which your goods will be repossessed and sold. This is not an excuse to forget about your debts, you still must aim to meet your commitments eventually.
5. Refinance the loan. Arrange a better deal on a new loan.
6. Sell your goods and repay the loan. You can do this, however you must first ask the lender’s permission.
7. Voluntary surrender. Ask the lender to sell your goods for you. This price would be lower than if you arranged to sell them yourself.
8. Apply for bankruptcy. This is a last resort as it can have serious consequences.
There are federal government privacy laws that protect the consumer and businesses:
Financial pressures can lead to a number of social consequences. Being in debt may create a lot of tension and pressure at home and may lead the person in debt to feel that they are caught in a trap and that there is no way out. This can lead to emotional illness, such as depression, anxiety and fatigue, domestic violence, family breakdown and even suicide.
For an easy way to pay for goods and services consumers often result to credit cards. Before consumers use credit cards it is important that they are able to afford them. One of the best ways of doing this is to plan your purchases and form a budget for your money so that you can keep track of your finances.
Records of current credit accounts
records of previous applications for credit
previous defaults with members of the credit bureau
Previous overdue accounts, that have been settled
Court judgements or bankruptcy orders
If the information in the consumer's records is incorrect, incomplete, out of date, or misleading, then the consumer can amed their record.
Any money that you owe is called a debt. The person who owes this money can also be called a debtor/borrower and the person they owe this money to is the creditor. A debtor has an obligation to the creditor and they must fulfil these obligations. If you fail to fulfil these, the creditor can take legal action against you in order to recover the money that is owed.