If you are in debt but you don’t want to go through insolvency, it is advisable to study the provisions on debt agreement in the Bankruptcy Act. But, what is a debt agreement? Can it protect you from creditors?

A debt agreement is a legally binding agreement between you and your creditors, with the following stipulations:

  • Your creditor agrees to accept a specific amount payable within a fixed time period, usually within four years. It can also be a full debt settlement with an amount lesser than the actual debts.
  • It signed and accepted by you and your creditor
  • The moment it is signed, the interests on unsecured loans stop accumulating
  • It contains provisions that could help you handle all your debts and pay them according to schedule

Here are the consequences of signing debt agreements:

  • Your name is listed in the Australian Insolvency Index
  • It remains in your credit history for 2 to 5 years

A debt agreement can protect you legally. Credit collectors and creditors cannot threaten you or bother you with incessant calls every now and then. It also gives you an opportunity to save money for your repayments. But, you have to stick to a budget, so that you will be able to make regular payments on schedule.

Alternative to Debt Agreements

Short term loan

If you need cash now, you can apply for a quick and easy approval loan. You can access the money within a week or even a day, depending on the loan processing schedules. You can also pay off high interest debts to keep them from growing and to avoid legal actions from creditors.

Second mortgage

Do you want to pay off all your loans? Consolidate it using your home equity as collateral. The amount depends on the equity in your home, which you have built up through your repayments and increase in its market value. If you are having a financial crisis and you want to pay off your loans by obtaining a new loan, it is important to study the conditions of the loan before you sign the contract. Make sure that the terms are favourable to you, and that you have the money to repay it.

With the advanced technology nowadays, applying for second mortgage and bad credit loans has never been easier. But lenders only provide financing to eligible applicants. Of course, almost all borrowers would pass the residency and age requirements. But, when it comes to creditworthiness, some borrowers may not be given a second glance.

Important provisions to consider when looking over your loan agreement:

First, lenders prefer applicants who are gainfully employed. They want proof of your income, such as payslip, income tax returns or other similar documents.

Second, they want clients with good credit history. If you have not been paying your utility bills and credit card balances for a while, your chance of getting a loan may be slim. Unless, you provide collateral to offset the risk, your application may be rejected or if you get approved, you may have to pay higher interests and fees.

Third, you need a local bank account where they would transfer the funds. But, if you apply for a loan with a specialised lender, your application may still be considered despite your bad credit and the absence of some documentary requirements. The approval is quick the loan process is simple and you will receive a conditional the moment you submit your online application. Upon approval, you only need to provide your proper identification and supporting papers.

Tips when looking for alternatives to debt agreement:

Review your expenditures

When your debts are running out of control, and you are using your income to pay for interests and fees, it is high time to take a good look at what you are doing with your finances. You can request for your free copy of your credit report, and gather the receipts and bills to track both your debts and payments. It will help you come up with an expense policy that will help you pay on schedule, and minimise expenses on unnecessary items.

Consolidate your loan

If you don’t want your financial problems to escalate, the first thing to do is to understand the loans that you are currently repaying. Which of these loans should be paid first? How much are you paying in interests for particular loans? How much can you save when you combine them all into a single loan?

You can pay off all your previous debts by adding and combining all your secured and unsecured credit amounts into one loan. One way of doing this is by getting a second mortgage. You can use the services of a specialised lender like Debt Consolidation that will provide you with competitive rates which will be definitely lower than all the interests of your loans combined together. It will not only save you money and provide you with peace of mind, but it will also help you avoid the negative consequences of debt agreements.