Topics on this page include:
> Why do people get into debt?
> Take control of your debt!
> How's your credit rating?
> Debt consolidation
> Problem gambling
> Bankruptcy
> Where can I get help?
> The hidden cost of debt
> Links
Why do people get into debt?
People get into debt for various reasons:
- Job loss, getting sick, relationship breakdown
- Rising interest rates
- Business failure
- Living so close to the limit of your financial ability that one emergency purchase pushes you into debt
- Borrowing more than you can afford to repay on loans, credit cards and store cards
- Spending more than you can afford because of bad shopping habits or problem gambling
- Taking out a big loan to pay for something they can't afford now such as house or car
Take control of your debt!
If your debt is out of control, advise your lenders immediately of the situation. Contact the credit card company, the department store, the finance house or the bank and explain your problem so you can work out a repayment plan. Take control of your situation:
- Increase your capacity to repay - find ways to increase your income such as getting another job
- Vary loan repayments on hardship grounds
- Consolidate your debts
- Find out about court instalment orders (new window)
- Consider bankruptcy (new window), but only as an absolute last resort
- Get help from a financial counsellor (new window)
If possible, discuss your options with a financial counsellor.
How's your credit rating?
If you've had trouble making minimum repayments on a loan or credit card within the past five years, you've probably affected your credit rating.
The Australian credit rating agency, Baycorp Advantage (new window), will have your misdemeanour on record, if the loan company reported it. Before you approach a lender, apply to Baycorp Advantage to check your credit rating. You can get the results in one day if you pay $27 or if you can wait 10 days, you can get it for free.
Debt consolidation
People with a variety of debts attracting various rates of interest are usually encouraged to roll all debts into one loan. This is called debt consolidation.
With debt consolidation, you can save on interest costs by taking out a personal loan at a lower rate of interest than your credit card(s) and you make monthly repayments on this one single loan.
To make this a winning strategy, you have to maintain your current repayments. If your current repayments are $500 a month on your high-interest credit cards, maintain this same level of payment on your new all-in-one loan. Depending on the size of your debt, you'll save hundreds or even thousands of dollars and take months or years off your repayments.
Problem gambling
For most people, gambling is not a problem. But gambling can create financial, social and personal problems for some people and their families. Problem gambling involves having a loss of control over how much time and money you spend on gambling. As a result, this has a negative affect on your finances and other areas of your life such as your relationships, job, study or training.
If you feel that you or someone you know may have a problem with gambling, the Victorian Government service, Gamblers Help (new window), is there to provide advice and support. Gamblers Help services operate throughout Victoria and provide immediate telephone help, and individual, couple and family counselling and group support. The Victorian Government's Problem Gambling (new window) website discusses gambling issues and provides information about support services and links to other sites for more information.
Bankruptcy
If you're on a low income, bankruptcy may seem like an easy way to clear all your debts, but this is short-sighted. Once you're declared bankrupt, it remains on record with the credit reference agency for the next seven years and will affect you when you may need to borrow again.
It should only be considered under professional advisement when all other options have been exhausted.
Visit Victoria Legal Aid (new window) or the Insolvency and Trustee Service Australia (ITSA) (new window) for further information on the legalities of bankruptcy.
Where to go for help
The FIDO site details what financial counsellors do and lists contacts (new window).
The Financial and Consumer Rights Council (new window) provides free advice to help you create a budget and to manage your debt.
You may be eligible get receive help from Victoria Legal Aid (new window).
Debt can place a lot of added pressure and strain on families and relationships. If you, or someone you care about is experiencing a hard time because of debt, get help through a counselling service such Lifeline (new window) by calling 13 11 14 or Kids Helps Line (new window) on 1800 55 1800.
Links
Victoria's Problem Gambling Strategy
This Victorian Government site has facts and information about problem gambling and its associated issues and provides links and contact details for support and advice services.
Financial Information Delivered Online (FIDO) - Ways to Deal With Debt
Information to help you find the most appropriate way to deal with debt.
Money Manager - Credit Card Basics
Provides a step-by-step guide to using credit cards.
Dollars and Sense
Information on debt and tips and advice to help you avoid it or get out of it.
Victoria Legal Aid
Legal information about bankruptcy.
Insolvency and Trustee Service Australia (ITSA)
ITSA is the body that deals with bankruptcy. They provide information to help you make an informed decision about whether or not to declare bankruptcy.
Financial and Consumer Rights Council (FCRC)
FCRC is the peak body for Financial Counselling and Consumer Support services in Victoria.
