Debt Consolidation: A How To Guide

Wikipedia

Ausdebtsolutions — Wed, 21 Jan 2009 05:19:00 +1100

No time to write a full post this week so please find attached the wikipedia article on debt until next week.

If you need help please proceed to www.ausdebtsolutions.net

Debt

From Wikipedia, the free encyclopedia

Debt is that which is owed; usually referencing assets owed, but the term can cover other obligations. In the case of assets, debt is a means of using future purchasing power in the present before a summation has been earned. Some companies and corporations use debt as a part of their overall corporate finance strategy.

A debt is created when a creditor agrees to lend a sum of assets to a debtor. In modern society, debt is usually granted with expected repayment; in many cases, plus interest. Historically, debt was responsible for the creation of indentured servants.

Payment

Before a debt can be made, both the debtor and the creditor must agree on the manner in which the debt will be repaid, known as the standard of deferred payment. This payment is usually denominated as a sum of money in units of currency, but can sometimes be denominated in terms of goods. Payment can be made in increments over a period of time, or all at once at the end of the loan agreement.

Types of debt

A company uses various kinds of debt to finance its operations. The various types of debt can generally be categorized into: 1) secured and unsecured debt, 2) private and public debt, 3) syndicated and bilateral debt, and 4) other types of debt that display one or more of the characteristics noted above.^[1]

A debt obligation is considered secured if creditors have recourse to the assets of the company on a proprietary basis or otherwise ahead of general claims against the company. Unsecured debt comprises financial obligations, where creditors do not have recourse to the assets of the borrower to satisfy their claims.

Private debt comprises bank-loan type obligations, whether senior or mezzanine. Public debt is a general definition covering all financial instruments that are freely tradeable on a public exchange or over the counter, with few if any restrictions.

Loan syndication is a risk management tool that allows the lead banks underwriting the debt to reduce their risk and free up lending capacity.

A basic loan is the simplest form of debt. It consists of an agreement to lend a principal sum for a fixed period of time, to be repaid by a certain date. In commercial loans interest, calculated as a percentage of the principal sum per year, will also have to be paid by that date.

In some loans, the amount actually loaned to the debtor is less than the principal sum to be repaid; the additional principal has the same economic effect as a higher interest rate (see point (mortgage)).

A syndicated loan is a loan that is granted to companies that wish to borrow more money than any single lender is prepared to risk in a single loan, usually many millions of dollars. In such a case, a syndicate of banks can each agree to put forward a portion of the principal sum.

A bond is a debt security issued by certain institutions such as companies and governments. A bond entitles the holder to repayment of the principal sum, plus interest. Bonds are issued to investors in a marketplace when an institution wishes to borrow money. Bonds have a fixed lifetime, usually a number of years; with long-term bonds, lasting over 30 years, being less common. At the end of the bond's life the money should be repaid in full. Interest may be added to the end payment, or can be paid in regular installments (known as coupons) during the life of the bond. Bonds may be traded in the bond markets, and are widely used as relatively safe investments in comparison to equity.

Accounting debt

In national accounting, debts are added according to those who are indebted. Household debt is the debt held by households. "National" or Public debt is the debt held by the various governmental institutions (federal government, states, cities ...). Business debt is the debt held by businesses. Financial debt is the debt held by the financial sector (from one financial institution to another). Total debt is the sum of all those debts, excluding financial debt to prevent double accounting. These various types of debt can be computed in debt/GDP ratios. Those ratios help to assess the speed of variations in the indebtness and the size of the debt due. For example the USA have a high consumer debt and a low public debt, while in eastern European countries, for example, the opposite tends to be true.

There are differences in the accounting of debt for private and public agents. If a private agent promises to pay something later, it has a debt, and this debt is enforceable by public agents. If a public body passes a law stating that it'll pay something later (a kind of promise), it keeps the right to change the law later (and not to pay). This is why, for instance, the money governments promised to pay for retirements does not show up in the public debt assessment, whereas the money private companies promised to pay for retirements do.

Securitization

Main article: Securitization

Securitization occurs when a company groups together assets or receivables and sells them in units to the market through a trust. Any asset with a cashflow can be securitized. The cash flows from these receivables are used to pay the holders of these units. Companies often do this in order to remove these assets from their balance sheets and monetize an asset. Although these assets are "removed" from the balance sheet and are supposed to be the responsibility of the trust, that does not end the company's involvement. Often the company maintains a special interest in the trust which is called an "interest only strip" or "first loss piece". Any payments from the trust must be made to regular investors in precedence to this interest. This protects investors from a degree of risk, making the securitization more attractive. The aforementioned brings into question whether the assets are truly off-balance-sheet given the company's exposure to losses on this interest.

Debt, inflation and the exchange rate

As noted above, debt is normally denominated in a particular monetary currency, and so changes in the valuation of that currency can change the effective size of the debt. This can happen due to inflation or deflation, so it can happen even though the borrower and the lender are using the same currency. Thus it is important to agree on standards of deferred payment in advance, so that a degree of fluctuation will also be agreed as acceptable. It is for instance common^{[citation needed]} to agree to "US dollar denominated" debt.

The form of debt involved in banking accounts for a large proportion of the money in most industrialised nations (see money and credit money for a discussion of this). There is therefore a relationship between inflation, deflation, the money supply, and debt. The store of value represented by the entire economy of the industrialized nation, and the state's ability to levy tax on it, acts to the foreign holder of debt as a guarantee of repayment, since industrial goods are in high demand in many places worldwide.

Inflation indexed debt

Borrowing and repayment arrangements linked to inflation-indexed units of account are possible and are used in some countries. For example, the US government issues two types of inflation-indexed bonds, Treasury Inflation-Protected Securities (TIPS) and I-bonds. These are one of the safest forms of investment available, since the only major source of risk — that of inflation — is eliminated. A number of other governments issue similar bonds, and some did so for many years before the US government.

In countries with consistently high inflation, ordinary borrowings at banks may also be inflation indexed.

Debt ratings, risk and cancellation

Risk free interest rate

Lendings to stable financial entities such as large companies or governments are often termed "risk free" or "low risk" and made at a so-called "risk-free interest rate". This is because the debt and interest are highly unlikely to be defaulted. A good example of such risk-free interest is a US Treasury security - it yields the minimum return available in economics, but investors have the comfort of the (almost) certain expectation that the US Treasury will not default on its debt instruments. A risk-free rate is also commonly used in setting floating interest rates, which are usually calculated as the risk-free interest rate plus a bonus to the creditor based on the creditworthiness of the debtor (in other words, the risk of him defaulting and the creditor losing the debt). In reality, no lending is truly risk free, but borrowers at the "risk free" rate are considered the least likely to default.

However, if the real value of a currency changes during the term of the debt, the purchasing power of the money repaid may vary considerably from that which was expected at the commencement of the loan. So from a practical investment point of view, there is still considerable risk attached to "risk free" or "low risk" lendings. The real value of the money may have changed due to inflation, or, in the case of a foreign investment, due to exchange rate fluctuations.

The Bank for International Settlements is an organisation of central banks that sets rules to define how much capital banks have to hold against the loans they give out.

Ratings and creditworthiness

Specific bond debts owed by both governments and private corporations is rated by rating agencies, such as Moody's, Fitch Ratings Inc., A. M. Best and Standard & Poor's. The government or company itself will also be given its own separate rating. These agencies assess the ability of the debtor to honor his obligations and accordingly give him a credit rating. Moody's uses the letters Aaa Aa A Baa Ba B Caa Ca C, where ratings Aa-Caa are qualified by numbers 1-3. Munich Re, for example, currently is rated Aa3 (as of 2004^[update]). S&P and other rating agencies have slightly different systems using capital letters and +/- qualifiers.

A change in ratings can strongly affect a company, since its cost of refinancing depends on its creditworthiness. Bonds below Baa/BBB (Moody's/S&P) are considered junk- or high risk bonds. Their high risk of default (approximately 1.6% for Ba) is compensated by higher interest payments. Bad Debt is a loan that can not (partially or fully) be repaid by the debtor. The debtor is said to default on his debt. These types of debt are frequently repackaged and sold below face value. Buying junk bonds is seen as a risky but potentially profitable form of investment.

Cancellation

Short of bankruptcy, it is rare that debts are wholly or partially forgiven. Traditions in some cultures demand that this be done on a regular (often annual) basis, in order to prevent systemic inequities between groups in society, or anyone becoming a specialist in holding debt and coercing repayment. Under English law, when the creditor is deceived into forgoing payment, this is a crime: see Theft Act 1978.

International Third World debt has reached the scale that many economists are convinced that debt cancellation is the only way to restore global equity in relations with the developing nations.

Effects of debt

Debt allows people and organizations to do things that they would otherwise not be able, or allowed, to do. Commonly, people in industrialised nations use it to purchase houses, cars and many other things too expensive to buy with cash on hand. Companies also use debt in many ways to leverage the investment made in their assets, "leveraging" the return on their equity. This leverage, the proportion of debt to equity, is considered important in determining the riskiness of an investment; the more debt per equity, the riskier. For both companies and individuals, this increased risk can lead to poor results, as the cost of servicing the debt can grow beyond the ability to pay due to either external events (income loss) or internal difficulties (poor management of resources).

Excesses in debt accumulation have been blamed for exacerbating economic problems.^[2] For example, prior to the beginning of the Great Depression debt/GDP ratio was very high. Economic agents were heavily indebted. This excess of debt, equivalent to excessive expectations on future returns, accompanied asset bubbles on the stock markets. When expectations corrected, deflation and a credit crunch followed. Deflation effectively made debt more expensive and, as Fisher explained, this reinforced deflation again, because, in order to reduce their debt level, economic agents reduced their consumption and investment. The reduction in demand reduced business activity and caused further unemployment. In a more direct sense, more bankruptcies also occurred due both to increased debt cost caused by deflation and the reduced demand.

It is possible for some organizations to enter into alternative types of borrowing and repayment arrangements which will not result in bankruptcy. For example, companies can sometimes convert debt that they owe into equity in themselves. In this case, the creditor hopes to regain something equivalent to the debt and interest in the form of dividends and capital gains of the borrower. The "repayments" are therefore proportional to what the borrower earns and so can not in themselves cause bankruptcy. Once debt is converted in this way, it is no longer known as debt.

Arguments against debt

Main article: Criticism of debt

Some argue against debt as an instrument and institution, on a personal, family, social, corporate and governmental level. Islam forbids lending with interest even today, while the Catholic church allowed it from 1822 onwards, and the Torah states that all debts should be erased every 7 years and every 50 years.

Debt will increase through time if it is not repaid faster than it grows through interest. This effect may be termed usury, while the term "usury" in other contexts refers only to an excessive rate of interest, in excess of a reasonable profit for the risk accepted.

In international legal thought, Odious debt is debt that is incurred by a regime for purposes that do not serve the interest of the state. Such debts are thus considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state.

In an economy with high interest rates, debt will be more costly to a business than more flexible dividends on equity investment. It may be easier for a struggling business to be financed through equity investment as it may be possible to avoid paying a dividend if times are hard.

Levels and flows

Main article: Debt levels and flows

Global debt underwriting grew 4.3% year-over-year to $5.19 trillion during 2004. It is expected to rise in the coming years if the spending habits of millions of people worldwide continue the way they do.

References

^ Joseph Swanson and Peter Marshall, Houlihan Lokey and Lyndon Norley, Kirkland & Ellis International LLP (2008). A Practitioner's Guide to Corporate Restructuring page 5. City & Financial Publishing, 1st edition ISBN: 9781905121311
^ 5 Ways to Get Out of Debt Faster. Kiplinger.

for more information please proceed to www.ausdebtsolutions.net

The Christmas Hangover

Ausdebtsolutions — Wed, 14 Jan 2009 04:39:00 +1100

The Christmas Hangover

In the next two months a series of unwanted letters will be coming to homes across Australia. Credit Card Bills. The reality is that unless you take action early these bills are not going anywhere making next Christmas even harder.

Here are some simple tips that might just help lessen the impact:

Can you transfers your balance to other card on an interest free basis? This is not to advocate taking out more credit and it is imperative that if you are able to transfer balances you cancel your other card immediately.

Don’t just make the minimum payment. Your card balances are not going anywhere if you do.

Don’t spend anymore on them! This may seem common sense however many people continue to in the belief that the money they are not spending from their wage they can use to pay other credit cards. More often than not this does not happen leading to balances increasing further.

Set yourself realistic targets. Rather than saying to yourself that you are going to try and pay all of your card off why not try and pay a portion off? For example, perhaps say that in 6 months you are going to pay off 40% of the balance.

If, even before your Christmas spending you were over committed you may find that your next set of bills are the ones that tip your finances over the edge. If this is the case you may wish to consider seeking professional help with your finances. Australian Debt Solutions can help you further. Simply visit our website www.ausdebtsolutions.net and if your require assistance simply leave your details and one of our advisors will call you back.

Full and Final Offers: Part 2

Ausdebtsolutions — Thu, 08 Jan 2009 04:58:00 +1100

Part Two: Making the offer

Once you have established how much you are going to offer your creditors your next step is actually making the offer to them. This is by the far the hardest part of making any settlement offer and requires determination and perseverance.

What is your overall goal?

Most properly you want to clear all off your debts. However, you need to be realistic. If you are initially only able to offer 50 cent in the dollar to all of your creditors it is unlikely you will be able to clear all of them. If this is the case you may wish to consider paying off the creditors whom you pay the most interest to off first and save money in the long run. If you have over 50% of the overall debt to offer you may well be able to clear everything.

Using my example in the previous post I am going to make an offer to my creditors. Each of my creditors will receive the following:

A cover letter explaining my circumstances

A breakdown of all my creditors and the offers being made to them (do not show the account numbers of the other creditors only the one you are writing to)

Below is a simple letter template to send to creditors (remember to add your address and date etc…)

Dear Sir/Madam,

Ref: (enter account number here)

I am writing to you in relation to the above account and the possibility of offering a full and final settlement.

In total I have raised the sum of (enter amount here) and have offered my creditors a pro rata payment of (enter pro rata amount). As you can see all creditors have been offered and equal amount and no favour or preference has been shown in making these offers. These offers are made on strictly first come first served basis

These offers are made on strictly first come first served basis and can be paid immediately upon acceptance.

Your sincerely,

Under no circumstances leave your phone number. If you are in arrears you find that by leaving your phone number you will be open to calls chasing you for money and the like!

Once you have sent your letters you can expect to wait between three to four weeks for a reply. If your offers are accepted it is likely you will be given a two week period in which to pay the amount. If you send a cheque make sure that it is sent recorded and that you have details of when it was received in case there is any argument that your payment did not reach the creditor on time. Don’t leave making the payment until the last minute, if you miss the payment date set by the creditor you may have to renegotiate the settlement again.

Make sure that if a creditor agrees to your settlement ask for confirmation in writing. If the creditor refuses to do this make sure you get the name of the person you are talking to and what time you spoke to them to ensure there can be no come back for you in the future.

What if my offers are not accepted?

It may be that not all of your creditors accept the offers that you have made. If this happens if may be wise sitting down again and working out how much interest you are paying on the accounts and which creditors it would be more prudent to pay off first. In the first instance however it is wise not to make any rash positions. Here are some could tips that may help you get an acceptance:

1, Explain that if you go back to paying the debt monthly you may be doing so for some time and given the financial situation at present this may a bad long term move for them.

2 If you have to pay back the money you have raised in either a mortgage or loan you may find that you will have even less to pay the creditors on a monthly basis and therefore accepting your offer now is the most prudent thing to do.

3, All creditors think there debt is the most important and want to be paid first and the most. Don’t fall for it. Treat each creditors equally and you will make life a lot easier on yourself.

4, Be strong! Don’t crumble in the face of creditor pressure. If you offer is rejected simply but that creditor to the back of the queue and concentrate on other creditors before going back to them.

Once you have sent your payments off make sure your creditors credited your payment against the account and that is has no been closed. Sometimes creditors can be a bit slow in doing this. If your are chased for payment when you have sent the payment simply explain who you have spoken to and advise them that a payment is on the way or indeed is being credited against the account.

For more information or advice please leave a comment below or proceed to www.ausdebtsolutions.net and one of our advisors will call you back.

Full and Final Offers: Part 1

Ausdebtsolutions — Tue, 02 Dec 2008 05:20:00 +1100

Part One: Preparation

Offering settlements to your creditors maybe one of the best ways of clearing your debts and saving yourself some money in the process. If you have some savings or access to a lump sum of cash then you may wish to consider this as an option to becoming debt free. In order to proceed you will need the following items:

Up to date balances of your debts (you cannot offer short settlements on secured debts).

A pen and paper.

A calculator.

A lump sum of money (typically more than 50% of what you owe in total).

The first thing you need to do is compare your lump sum to the total amount you owe. Anything over 50% is a good place to start if you are intending to try and clear all your debts. Anything lower than 50% and you may struggle to clear your debts entirely but might be able to save yourself some money all the same!

For the purposes of this exercise I owe $60,000 and have $39,600 to offer creditors. My debts are as follows:

Loan 1: 10,000

Loan 2: 15,000

Loan 3: 10,000

Credit Card 1: 5,000

Credit Card 2: 7,000

Credit Card 3: 9,000

Credit Card 4: 4,000

Initially, I am going to offer my creditors a pro rata payment. This means they will be offered a sum that is comparatively the same. It is important to be fair when offering creditors a payment offer as quite rightly they will expect to be treated fairly (this will become more apparent in Part 2 of this post).

For the above debts my pro rata offers will look like this.

Debt Amount Owed Pro Rate Offer (66% of debt)

Loan 1: 10,000 6,600

Loan 2: 15,000 9,900

Loan 3: 10,000 6,600

Credit Card 1: 5,000 3,300

Credit Card 2: 7,000 4,620

Credit Card 3: 9,000 5,940

Credit Card 4: 4,000 2,640

Total £60,000 £39,600

Now you have your offers you will need to send them to your creditors. In next weeks post I will explain how to this is done as well as include a letter template to send to your creditors.

For more information in the interim please proceed to www.ausdebtsolutions.net or leave a comment below.

What is an Informal Payment Plan?

Ausdebtsolutions — Tue, 04 Nov 2008 07:38:00 +1100

(in parts of this entry that refer to a previous post please refer to the first post of this blog http://ausdebtsolutions.blogspot.com/)

If you are struggling with debt and have looked on the internet for help you may have come across Debt Agreements, Bankruptcy and other debt consolidation methods. Many people feel that theses are their only options however one avenue you may which to explore is that of an informal payment plan or debt management as it is commonly known as. It may be wise reading the first on this Blog ‘Income and Expenditure’ as it will help you greatly should you decide to pursue this option.

Firstly here are a few pertinent points to remember about informal payment plans:

1, Your creditors are under no obligation to accept your offers or indeed freeze interest on your accounts.

2, Before you get arrangements in place you balances may actual increase in the short term.

3, You are not protected legally and may face further action by your creditors if you do not make your monthly contractual payments.

4, Your credit score will be harmed by making reduced payments.

5, You have maintain full payments to secured debts such as car hire purchases, secured loans and mortgages.

The above points are very much worse case scenario situations and with determination informal payment plans may act as a could buffer before you decide what course of action to follow next. Although there are no ‘official’ criteria as to what circumstances should constitute considering an informal payment plan it may be wise to consider the following points:

1, How long are you going to be paying your debts?

If having worked out your income and expenditure (see first post) and you only have $200 a month to offer your creditors and you owe $40,000 you are best case scenario going to be paying your debts for 16 years. Clearly, this is a ridiculous amount of time to be under such financial constraints and you are properly better off seeking alterative solutions. If however, you are able to afford more then amount of time you are repaying your debts maybe a lot shorter in timescale. In short. Be realistic with yourself. Some sites sell debt solutions products under the guise of saying that by avoiding bankruptcy you are doing the ‘honourable’ thing. Generally speaking, only you know debt is effecting your life and perhaps by doing an informal payment plan you could see for yourself what debt consolidation is like in practical terms before committing to something more formal such as bankruptcy or a Debt Agreement.

2, Are you strong enough to say ‘no’.

If you pay less to your creditors they are naturally going to hassle you for more. In order for an informal payment plan to work you must learn to say ‘no’. Make your offers and then your payments. If a creditor asks for another $10 and they will freeze interest and charges then it may be worth considering. However, if you begin paying one and not the other you are going to make things worse. If you have sent your income and expenditure one tactic maybe to ask them where they can see you getting the extra money from and negotiate from there.

3, Do not use anymore credit.

This may seem academic but if you are still spending on cards your creditors are not going to accept any reduced offers.

4, What can you give up?

Debt should not mean you put your life on hold but could that $100 a month gym membership that you go to once a fortnight be better spent on paying your debts. You have to see it from your creditors perspective. Imagine if you were owed money and someone said they wanted $80 for the top end cable package? You would at least expect them to downgrade to something cheaper and perhaps you could do the same?

5, Is there anyway you could offer settlements?

I will be covering this topic in next weeks post. However, you may have some savings which could be used to offer one off settlements?

6, Expect thing to get worse before they get any better!

If you have been maintaining regular payments to your creditors they are naturally going to be surprised to see that you are suddenly offering them less each month. They will add penalty fees and your balances will increase before they start going down. The first six months are often the worst and can be the cause of a lot of stress and worry. Try to remain positive and if you feel inclined post here for more help and support.

Think about the above if you are considering an informal payment plan. In the next few weeks I will be writing another post about one of the most important aspects of Debt Consolidation which is how to cope when you are consolidating your debts. You can find more information at our site www.ausdebtsolutions.net or feel free to leave a post and I will answer it as soon as possible.

Stopping debt becoming bad debt!

Ausdebtsolutions — Tue, 28 Oct 2008 03:43:00 +1100

Whilst listening to a recent radio debate on personal debt in Australia I was struck by how many of the people calling in were so amazed that they had ‘suddenly’ discovered they were unable to keep up with their monthly payments. One caller even said the following ‘we were just spending and spending and had no idea how much we owed’. This sentence struck me as incredible. How could you not know how much you owe? The woman in question was considering bankruptcy despite having never missed a monthly payment, she had no idea she owed over $50,000 and was actually technically insolvent. The aim of this post is to give some tips in helping you stop those credit card debts from getting beyo

1, Using credit to pay credit.

It’s easy for debt to ‘snowball’. Rather using your wage you instead use other cards to pay other cards. The result is one goes down (as long as you don’t spend on it) and one goes up. Short term you are not going to be directly be paying your card in that it will not be coming out of your wages. However, this means your overall debt level will simply continue to grow. Long-term this is a sure fire way of crippling yourself financially. Take stock now and stop obtaining further credit!

2, Missing payments.

This may sound obvious but some people simply shrug this off as being ‘one of those things’ or claim they will pay ‘double next month’. Wrong. Missing payments not only means your credit rating will suffer but you will incur late fees and any other fees your credit company decides to add on. If you can’t afford to make your monthly payments to your creditors considered talking to them and explaining why you are able to pay the contractual amount.

3, Cut back on pointless card purchases.

Try not to pay for everyday items on credit cards such as groceries and petrol. ‘Little’ purchases all add up and if you are paying interest on them what really is the point?

4, Falling for ‘interest free’ offers.

If you have more than one card you might think that balance transfers from one card to another are a great idea. You may not pay any interest for six months which is great. However, the temptation is now there to spend on your old card which no longer has a balance. Now six months comes along. You’ve got two cards with large balances and there’s another interest free offer….STOP.

5, Debt Consolidation Loans

Easy. One loan to pay off all your cards. You take the loan, it cuts your payments down and everything’s fine. However, unless you have cancelled all your cards or cut them all up you may be tempted to spend on them again. If you do spend on them again (thousands of people do) you will find your debt levels doubling at an alarming rate.

6, Payment protection and other insurances!

No, I’m not saying ‘cancel your payment protection’ but…do you really need it? For example you may have been sold your insurance on with a line like ‘how will you pay your cards if you lose your job?’. A valid point. However, what do you do for a living? If you a taxi driver working in Sydney and your firm closes down is it really going to take that long to find alternative employment? Likewise, how much time have you had off due to sickness? Does your company pay sick leave? If so how likely is it you are going to miss a payment due to illness? Insurance polices can add up each month, could the money spent on them better be used to paying off the balances?

7, Cut your cards up!

If you have reached a point whereby you think you debts are too high why not cut your cards up? You can always order another one and you are instantly taking away the temptation of spending on them!

This post will be updated with more thoughts and ideas when they come to me. Debt is something that can be brought under control if you can bring it under control early enough. If you feel that you could do with some more advice or would like to speak to an advisor please feel free to visit our website or leave a comment below:

www.ausdebtsolutions.net

The Credit Crunch and Debt Consolidation

Ausdebtsolutions — Tue, 21 Oct 2008 02:04:00 +1000

The Credit Crunch and getting out of debt!

Unless you’ve been in the bush for the past year without any form of communication you may have noticed there is something of crisis going on at the moment. It’s all extremely complicated, this article may help where I can’t but the long and short of it is times are hard and are getting to get a lot harder.

If you are currently struggling with debt problems you maybe considering seeking professional assistance by way of a re-mortgage or a debt agreement (to find out more click on the links below:

www.ausdebtsolutions.net/index_files/debtagreements.htm

www.ausdebtsolutions.net/index_files/mortgagerefinance.htm

The problem is that if you are struggling with debt the current financial situation is now doubt adding even more pressure on what is not doubt a tough situation. Commonly, there are three forms of consolidation, further borrowing, informal arrangements and formal arrangements. In this post I will address how each of these is being affected by the credit crunch.

Further borrowing.

Without doubt this form of consolidation has been hit the hardest by the credit crunch and in many respects is the actual cause of the current financial crisis. Put simply, there has been too much borrowing in the forms of mortgages, loans and credit cards. When people consolidate by borrowing further they normally do so in the form of loans and re-mortgages.

In the past it was relatively easy for people with poor credit history to get out of debt by using the equity in their homes to re-mortgage and consolidate their debts. These ‘sub-prime’ mortgages are the very reason why the credit crunch has happened. Too many people are unable to repay their mortgages thus resulting in huge numbers of repossessions and banks losing millions of dollars. Clearly, the bank industry has had to react to this which they have done by not lending to so called ‘sub-prime’ borrowers. If you have a poor credit history and are a homeowner you may struggle to find lenders who will assist at this present time.

The other important factor to take into consideration is for those coming to the end of fixed rate mortgages. If your fixed rate is coming to an end it is highly like that your payments may increase as a result, try the sites below for more help:

www.helpmechoose.com.au

www.yourmortgage.com.au

Whereas before your home could be the key to bring about debt relief for the foreseeable future you may have to pursue other options when it comes to debt consolidation.

Informal Arrangements

Unfortunately, there are no statistics to show, however in theory there is no reason why people trying to put informal payment plans in place with their creditors should not be on the rise. If you are struggling with debt problems and do not which to declare bankruptcy or seek to obtain a Debt Agreement why not try and talk to your creditors directly? With banks losing money it would stand to reason that they would be more agreeable to this form of debt consolidation. To find out more please see:

www.ausdebtsolutions.net/index_files/debtmanagement.htm

Bankruptcy and Debt Agreements

The number of people declaring bankruptcy is increasing by the month. Unfortunately, with prices increasing those who are suffering with debt problems to wave the white flag and declare bankruptcy. There are ways of avoiding bankruptcy namely through a Debt Agreement.

Debt Agreements do mean that you have to pay some of your debts back, however, they are an excellent alternative to bankruptcy and may help you beat the credit crunch.

www.ausdebtsolutions.net

Introduction

Ausdebtsolutions — Wed, 24 Sep 2008 04:56:00 +1000

Dear All,

Over the coming weeks I'm going to use this blog to hopefully help those struggling with debt problems. Where possible I am going to try and write guides that maybe of help to you as well as posting links to other articles that maybe of help to you.

The Blog will be updated every Sunday and if you require anymore information either leave a message or contact us through www.ausdebtsolutions.net

Kind regards,

Australian Debt Solutions

Test

Ausdebtsolutions — Mon, 07 Jul 2008 05:20:00 +1000

This is a test blog entry.