Accumulating debt is simple but clearing it is a challenge many people face. Not paying it down or stopping the debt cycle can result in the weight of carrying a debt anchor, difficulty accumulating savings, financial hurdles down the track, and even lead to mortgage stress. On a basic level, it means you are often paying hundreds of dollars in interest which could be avoided. Why Should You Use a Debt Collection Agency? A Debt Collection Agency is a business that pursues the payment of debts on your behalf. They will also follow up with you if you don’t make your payments on time.
While there are good debts – such as a mortgage, as your repayments eventually build equity in your home – bad debts are those that do little to improve your financial outcome, such as credit cards, car loans and goods that are worth less than what you paid to purchase it. Clearing bad debts should be a priority for consumers.
I’ve outlined six areas of your finances to review that can help you to leverage clearing your debt:
- Acknowledge the debt. Recognising that you have a debt issue is the first step to clearing it, as you accept that there is a problem that needs to be fixed. Having debt should not be a shameful thing, however, many see it as a taboo subject. This is why some people don’t acknowledge their debt issue until they are in over their head and feel that they have no way out.
- Use the law in your favour. Consumers are protected by the National Credit Code, a set of laws that regulate all consumer lending and protect you around your borrowings and debt. For those who have business debt, this Credit Code does not cover them. However, each State has its own laws that apply in this area. In NSW, for example, there are reviews to ensure business contracts are fair. The point is to understand that you have protections in place, and leveraging these laws can help you escape a debt crisis, if you do it correctly.
- Check whether the lender has the correct license. If you have a loan from a small lender, check whether they have the correct licensing for the type of lending they do – there are plenty that do not. If they don’t have the right license, there is a possibility that you can write off the entire debt. This isn’t likely to be the case if your lender is a major bank.
- Consider whether refinancing is the best option for you. In an effort to reduce debt, many people opt to refinance. Refinancing should provide you with greater flexibility around the terms and how you handle your debt. However, refinancing can actually put you in more debt. If you have engaged with a finance broker, who is supposed to act in your best interests, you may be able to use a loophole to clear your debt if refinancing isn’t aligned to your purpose. As brokers are penalised if they don’t act in the best interests of their clients, you might be able to leverage this to start negotiations relating to your debt.
- Find out if your debt is statute barred. Under the statute of limitations relating to debt, debt collectors cannot harass you anymore if you haven’t made any payments for six years. Despite this, many people continue to receive collection letters and requests after that statute expires. If you are still receiving these communications, understand that you are under no legal obligation to repay it.
- Determine whether you benefit from a change in circumstances. Some people find themselves in major debt situations due to a change in circumstances – such as a divorce or loss of a job, which results in you being unable to service your loan. If something has changed since you took out your loan, you may be able to leverage this. Alternatively, it can provide you with a door to negotiating with your lender.
About Dominique Grubisa
DG Institute CEO and founder Dominique Grubisa has 25 years’ experience as a practising lawyer, debt management specialist and wealth management educator. She founded DG Institute in 2009, and is an experienced property investor, developer and entrepreneur. Dominique is also a seasoned speaker and media commentator who has provided commentary for major outlets including Sky News, news.com.au, Yahoo Finance, and Sydney Morning Herald. Dominque is a two-time winner of the ‘Female Entrepreneur of the Year in Asia, Australia or New Zealand’ Stevie Award in 2018 and 2019, and was a ‘Businesswoman of the Year’ finalist in the MyBusiness 2019 Awards.
For more information about DG Institute, visit dginstitute.com.au.
