9th Sep 2017

Beware of the traps when putting all your debt into one basket

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consolidate debt
Olga Galacho

Debt vultures, dodgy lenders and dishonest brokers are out to get their hands on your cash, your house, your whatever. They can smell blood, and the more you owe and the more desperate you are, the harder they will try to con you.

Not all groups offering debt-consolidation services are shysters. You may even find the odd banker who is happy to roll all your big bills into one manageable loan and not charge a ridiculously high interest rate.

But the MoneySmart advisers at the Australian Securities and Investments Commission (ASIC) don’t appear convinced. They say: “If you're having trouble paying your debts now, you stand little chance of paying back a new loan which might have a higher interest rate and added fees.”

The government-funded website recommends that all options be explored before considering a debt consolidation program with one of the dozens of spruikers offering the service.



Among the options are:

  • talk to your credit provider to see if you can have more time to pay off a loan or credit card
  • speak with companies to whom you owe money and ask for a payment plan
  • if it is a mortgage you are struggling with, change lender or sell your house
  • get free financial help from a counsellor
  • if you think your credit provider is being unfair, contact one of  these  ombudsmen: Financial Ombudsman Service (FOS) on 1800 367 287 or Credit and Investments Ombudsman (CIO) on 1800 138 422.

 

Free financial advice is more accessible than you may think. One great source is

The Consumer Action Law Centre (CALC). It is currently running a campaign to raise awareness among politicians of the scourge of debt vultures.

“Debt vultures give bad advice and spruik so-called ‘debt solutions’ to Australians in financial hardship, and waste the time of financial counsellors who are left to clean up the mess,” CALC says.

“Debt Vultures fly under the radar so that many Australians, including our politicians, just don’t know the full extent of the damage they are doing.”

MoneySmart also recommends contacting National Debt Helpline on 1800 007 007, or visiting its website for information and resources.

The MoneySmart website also has an online search tool for locating a financial counsellor.

Use our map to search for a financial counsellor or if you are a financial counsellor and you'd like to be added to this map, go to add/update your organisation page and complete the form. 

If you have done your homework and you are happy with the terms offered by a debt consolidation company, run the contract past a professional financial adviser or lawyer before you sign.

Have you consolidated your debt? What was your experience? Have you ever had to deal with debt vultures?

Related articles:
Avoiding debt disaster
Is debt ruining your retirement?
Do your debts die with you?





COMMENTS

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retired and relaxed
16th Nov 2017
12:27am
If you have multiple debts and are thinking of selling your house , paying the debts and buying a cheaper house allow for the fact that it costs around 10% of the selling price to sell and buy again. Where is this from? Stamp duty (Victoria) is at 6% plus agents fees and marketing will be 2%+ then solicitors fees, moving costs etc. So it is around 10% maybe only 9%. If it costs around 10% that means a $500,000 selling price means it costs you $50,000 to downsize to a cheaper house. Far better to increase the mortgage, pay all your debts and seriously plan to reduce the mortgage as quickly as possible. If you don't do this you are automatically $50,000 worse off plus your existing debts.


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