Businesses and individuals sometimes feel that they hit the end of the road when debt piles up and there is a cash crunch preventing them from making anticipated repayments. Well, in Australia it has now reached a point where the RBA is trying to encourage banks to regain their confidence in issuing new loans. This comes as Australia grapples with unusually high default rates and a rise in interest rates.

It is no co-incidence that one company that specializes in debt negotiation, DebtCo, is making waves in Australia by sometimes negotiating complete write offs, by enabling debtors to walk away without making any repayment. In most cases the least they achieve is also to avoid insolvency during debt negotiation with creditors. But this, is a new trend in Australia as we’ll discuss.

According to the Australian Bureau of Statistics’ (ABS) 2017-18 data, Australians are holding more debt than they’re earning in income for the first time. This situation has been fueled by the super-sized mortgages people take to purchase homes but also other macro-economic fundamentals that are changing in the market.

The number of people with extreme levels of debt has also hit new heights. The data revealed that about 28 percent of the poorest households hold debts three times their income. If this trend persists, the number of people facing insolvency could be pretty high.

Yet on second thought, there is help, and all you need to do is to enlist the services of debt negotiators. If the mounting pressure of debts is unbearable, negotiators could offer much-needed relief. But how do they tackle a client’s debt problems? Read on to know!

How Debt Negotiators Work

The goal of a negotiator is to get you out of the debt problem by pushing for the best possible deal. Once you hire them, they assess your case to determine your financial situation. This is vital in order to determine how best to help you and to help you understand the options you have. As Roland Bleyer, the CEO of DebtCo said: “We’re on the side of the debtor. Our role is to procure the best possible outcome for them and to minimize any potential hardship that could come because of unforeseen circumstances”. 

Once they’ve laid everything out to you, and your expectations are reasonable, they contact creditors on your behalf. In this case, they help your creditor understand the reasons for your inability to meet your debt obligations. If everything works out, they negotiate a lower amount or better payment terms.

The whole negotiation process can take several days to a few weeks, say like four weeks. It all depends on your case, the amount owed, and how responsive your creditor is during the process. It’s important to give your negotiator time to get a reasonable deal for you.

Whatever option the creditor accepts, debt negotiators will then help you manage your debt and stay on track with your payments.

Can Negotiators Save You Money?

If the goal is to have you pay the debt in one lump sum, debt negotiators can definitely save you money. Depending on your case, negotiators can get creditors to lower your debt amount by 5 percent to 95 percent. The lower they get, the more you save.

But there are also several costs associated with the new arrangement. For example, using a negotiator means you’ll have to set up a different account for repayments. The account can have a one-time set-up fee and monthly maintenance fees.

The total cost for maintaining the account will depend on the revised repayment period. Bear in mind that the negotiators’ charge will be a percentage on the agreed cut. The good thing is that the overall costs of using negotiators might be insignificant when they get the best deal for you. It’s basically a win-win deal.

Plus, most lenders only charge you when they secure a deal. If they fail, you don’t have to pay anything.

What If Lenders Take Legal Action?

In most cases, creditors are forced to take legal action when you ignore their calls and letters. Plus, your failure to reach out to them to explain your case just aggravates the situation.

Should they sue you, negotiators can still help you stop the legal action and work out a mutual agreement for your debt. During the negotiation process, any legal action and calls will stop. Still, you need to seek legal advice from a lawyer to understand the best way to approach your case. This is particularly important when the creditor what to repossess your asset.

Even in this scenario, the law still protects you and you have several rights as a borrower. You have a right to apply for a hardship variation from your lender. This allows you to change loan repayments due to your hardship.

If they reject your hardship application, you can complain and ask for a second case review. If you’re still not happy with their decision, it’s advisable to reach out to the Australian Financial Complaints Authority (AFCA).

How Does This Affect Your Credit Score?

As long as your loans remain under two months in arrears, you don’t have to worry about them affecting your credit rating. These loans will not harm your score no matter how much your negotiator secures for you in the revised arrangement.

Also, if your account is listed as “Default” by a credit reference agency, such as Equifax, before hiring a negotiator, it can be marked “Settled” once you complete your repayment. In this case, your credit score won’t take a hit from the loan.

Can You Negotiate On Your Own?

The truth is, it’s very much possible to approach the creditor yourself for a revised debt arrangement. It’s just like any other DIY task that you have the option to hire a pro. But some people find it wise to work with an expert.

The good thing about hiring a negotiator is that you won’t need to worry about the technicalities of the process. These experts live and breathe debt negotiation and they understand how to deal with certain financial institutions thanks to their experience, professional connections, and portfolio.

Choosing to work with debt negotiators can earn you the best deal and will certainly take the burden off your shoulders.

Tackle Credit Problems

Credit problems are quite normal in life, even though in Australia, things have been going pretty well and people once thought the country is “recession-proof”. You don’t have to fret when you have creditors constantly mounting pressure on you. The good thing is that you don’t need to handle creditors alone. Thanks to debt negotiators, you can easily secure the best deal for your debt repayment without even meeting them in person.

Take the time to find the right agency. Be sure to share as much information as possible regarding your debts and financial situation. This way, they will understand how best to approach your case when dealing with your lenders.