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Question: Debt consolidation loan with bad credit rating? (australia)?

(Posted by: luditess on 2010-02-10 15:01:04)

As a single mother, I have accumulated debt as I have chosen to work part- time to emotionally support my son, especially in the last few years of school. As a result, my finances are out of control. I have 5 credit cards, some of which have been taken over by collection companies. My responsibility to my son is now done and I am working full- time. However, it is a struggle to pay the interest and I simply cannot touch the sides of this debt. I have looked into a debtor's agreement which negotiates with each creditor, pays them out then direct debits from my account for five years - $60/ wk for a $20K debt. From where I'm sitting, that seems like a great option. Debtors agreements are one step short of bankruptcy but my friend says that will always show up on my credit rating. My argument is that my credit rating is already shot. She says I should try for a loan and negotiate with each creditor to pay less if they get a bulk amount to finalise the matter. She used to do this for a living and says she will help. The difference would be that my credit rating would be bad rather than terrible. My problem is - who is going to give me a loan? I wouldn't give me a loan, even though I know I have every intention of using that loan to wipe out interest rates of a debt I'll never be able to pay off as is. Should I approach the bank? Credit union? Is there companies in Australia who help people like me? PS. the debtors agreement was with Fox Symes - anyone have any experience with that arrangement?

Posted by: Judy on 2010-02-10, 15:03:11

Cons of debt consolidation: Get Into More Debt. It may be tempting to continue to use the credit cards that you've paid off. This is one of the reasons why debt consolidation is not a cure for credit problems. In fact, it could actually make problems worse, by allowing a person to get into more debt than they started with. May Cost More Overall. Even though the monthly payments and interest rate might be lower, you can end up with a longer-term loan in which you end up paying more interest in the long run. May Take Longer to Pay Off. If you don't end up using the extra monthly savings to pay off your loan (and perhaps even if you do), it could take you longer to get out of debt. Could Lose Your Home. If you go the route of a home equity loan, the lower interest rate that comes from listing your home as security might not be that beneficial if you default on your loan and lose your home. One Payment. In some cases, it can be beneficial to pay off smaller loans with higher-interest rates first. You don't have that option if you've lumped all your debt into a single loan. May not Qualify for a Loan. It's possible that with so much debt, you may not qualify for an additional loan. Or, if you do qualify, the interest rate might be high. Disreputable Debt Consolidation Companies. Not all non-profit debt consolidation services are looking out for your best interests. Make sure you read Debt help that isn't - some companies may be downright scams. Get a book on debt / credit repair and do it yourself for free. /

Posted by: lee on 2010-02-11, 01:08:26

Australian answer: Locate a local financial counsellor. Usually to be found through your local community advice program. They do not charge and they will have the experience and knowledge to assist you sort out this problem. They are sympathetic, not judgemental and will work with you to achieve a repayment program or an achievable goal in regards to your finances. Debtors arrangements do not show up on your credit file, you are being very responsible in not walking away from the debts. Don't despair, I think that the way you are trying to pay off your debts is admirable and reflects your honest character. Good luck and it great that you have supported your son.