You are said to be in debt when you owe money. The situation gets worse when there is an accumulation of debt and you see no way how you can repay them. This is a very bad situation and can give sleepless nights to many. This is not, however, an impossible situation. Instead, this is the time when you need to resort to expert opinions and advise and look for ways and means to reduce, or better still, completely settle off your debts.

Understanding debt

A debt is a monetary obligation that arises when you owe money to someone from whom you have either borrowed it; or to someone from whom you have purchased something by making him a promise of paying for it at a future date. One example could be a credit card purchase, for which you make payment at the end of the month to your bank (which would have already paid the seller at the time of the purchase). Things are fine so long as these debts are paid off as and when they fall due. However, a problem arises when it is not possible for you to pay off your debt. This is the time when experts advise to go for the various options such as debt counselling and credit debt consolidation or settlement or reduction etc.

Understanding debt consolidation

Debt consolidation is one of the options of getting out of debt. This process involves combining together all your debts so that you can repay them by taking out one single loan of the lump sum amount due. Though cynics see credit debt consolidation as a means of taking on more debt to repay existing debt; the fact remains that this way, it is possible to just make one consolidated payment for the entire lump sum debt amount. Such a loan is usually secured with collateral which could be any asset owned by you. Debt consolidation loans make it possible for you to make easier repayments. In addition, there are also debt agreements in Australia that can be of help.

Understanding debt agreements

Debt agreements are agreements between debtors and creditors and are governed by the legislation of the Government. These are a better and economical alternative to bankruptcy. Debt agreements in Australia need to be drafted and filed with the Australian Financial Security Authority; which then contacts your creditors to check if they agree to the terms set out in the debt agreements. There are also several advantages and disadvantages of debt agreements, much like everything else; and one of the requisites is at least a third of your creditors need to agree for a debt agreement to be signed and become binding. Some of the advantages are that charges and interests accruing on your unsecured debt get frozen; the impact of your financial situation on your credit report is much lesser than what it would be in case of a bankruptcy. The idea is to let you repay your debts on the basis of what you can afford to pay and not what your creditors want you to pay.