This week I had a client contact me who had received some not so great advice regarding her finances. She was drowning in debt, feeling extremely anxious at the thought of finding the money each month to make all the individual repayments and to top it all off her current mortgage broker shrugged it off when she asked for help telling her the only option was to sell her house!
Let me give you a bit of a back story. In the past that same broker advised, my now client, to take out multiple credit cards and personal loans to build her credit score. When she started falling behind in payments she became so overwhelmed she stuck her head in the sand. This resulted in debtors listing defaults on her credit file.
Now, this client is a, educated, intelligent woman earning a great income. She found herself incredibly upset and embarrassed about the position she was in and didn’t feel like she could reach out for help. She told me she had written and deleted so many messages to me over the last few months but hadn’t sent any for fear that I would look down on her.
If you are reading this post and any or all of this sounds like you I want to give you the advice I gave her in the hopes that you can minimise the impact that drowning in debt can have on your emotional well-being.
You can refinance your home loan with bad credit
There are lenders on the market that will refinance your home loan and any debts and/or defaults you have outstanding when you have a bad credit rating.
These types of loans are what I like to call ‘for now loans’. Are they ideal? No. Will you be paying a higher interest rate and more fees? Yes. But it is a solution and for the most part can be the only way out.
And when you think of the alternatives such as selling your home or worst still having to file for bankruptcy it really is the more desirable option.
By consolidating and letting the loan run to give your credit file time to clear you will minimise the monthly repayments you are expected to pay on all those debts individually and you can start to live again without that dark cloud hanging over your head.
Defaults on your credit file
Whenever a client comes to me with defaults already on their credit file I always, always refer them to a good credit lawyer. Now all credit lawyers aren’t created equal (but that’s a post for another day) so make sure you do your research before employing one on your behalf.
I recommend Victoria from Credit Fix Solutions. She has helped many of my clients in the past and is truly one of the best I have ever worked with. For more information visit her website www.creditfixsolutions.com.au
A credit lawyer can help you negotiate the terms of your defaults and can generally reduce the amount you need to pay back or have the defaults removed altogether.
By being able to get your credit file fixed it generally means that your broker or bank will be able to get you out of the short term solution of refinancing to a non-conforming lender quicker rather than waiting up to 5 years for your defaults to drop off.
While we are on the topic of credit files you do NOT have to take out consumer debt to improve your score. In fact, I advise the complete opposite! Sure, an 18-year-old should probably apply for a mobile phone or put an electricity account in their name to actually start their rating but this whole idea o0f borrowing to improve your rating is a load of nonsense!
To find out how credit scoring works read our article here.
The best thing you can do if you are struggling with repayments is to be proactive. Have a chat with your mortgage broker or bank. Explain the situation with full transparency.
I am always happy to have a chat and offer advice where I can. If you would like to have an obligation free chat give us a call on 0286071212 to book an appointment or fill out our enquiry form and one of our experienced staff will give you a call.
Until next time… Stay Savvy,