There comes a point at one time or another in many people’s lives when no matter how hard they try, they just can’t seem to get out of under the burden of debt. At time’s like these we generally will have one of two responses. That is either to close our eyes and hope that things will somehow miraculously improve or we can tackle our financial woes head on. Through years in the finance and banking industries I have seen that the vast majority of borrowers in trouble will bury their head in the sand unfortunately seeking assistance when it is usually too late for anything constructive to be done. The rare few who swallow their pride and admit to themselves that they need to do something about their situation are the ones that usually will get through with at least some of if not all of their finances in tact.

1. Identify the Cause

The first thing to do if you are finding yourself getting swamped by bills, credit card and mortgage repayments, is to sit down and work out the cause of your financial difficulty. Sometimes there will be a clear reason such as a loss of employment, illness or a marriage breakdown, sometimes it will not be so obvious. A very common cause for financial hardship is a gradual accumulation of debt over time which when teamed with periodic increases in interest rates and the cost of living eventually leads one to a position of financial over-commitment.

2. How Long Will it Last

Once you have identified the cause or causes for your financial situation you need to realistically look at how long you expect the contributing factors to last. A situation of unemployment would more than likely be considered short-term if you feel that employment can be fairly quickly obtained and that a paid salary would swiftly get you back on top. If the unemployment however is due to a long-term medical condition or you have retired from work permanently, then the possible solutions may be very different.

3. Can You Budget Out Of It

There is no silver bullet for every situation but a tightening of the financial belt is the first plan of attack in every case. Sit down with your partner, your accountant or a financial counsellor (free financial counselling services are available through most charity and community organisations) and work out exactly where you may be able to trim back on your spending. A financial professional such as those above will usually help you to complete a Statement of Financial Position which should allow them to easily identify where things have gone amiss and your potential solutions.

4. Contact Your Creditors

I can not stress enough that this is the most important thing you can do for yourself if you find yourself in financial difficulty. Contact your creditors. Every single one of them and not just the ones with which you are in arrears. Creditors for all consumer loans including credit cards, personal loans, car loans and home loans are required by law to provide some reasonable form of assistance to borrowers who are unable to meet repayments on their debt. This is in the form of a variation of contract which is a temporary or permanent change to some of the terms of the original credit contract. Most creditors and all major banks have financial difficulty officers in place who are more than happy to review your case and look at possible assistance types available to you as they prefer to provide a solution that will allow a borrower to get back on track rather than end up in default and legal action.

5. Hardship Assistance Programs

Hardship assistance programs vary from one lender to another in their details but there are a few common to most of the industry. The most common solutions available through creditors for unsecured debts such as credit cards are temporary repayment holidays or payment moratoriums which involve a freeze on payments which may range from anywhere between one to twelve months generally or alternatively longer term reduced repayment plans for long-term hardship scenarios. In certain cases lenders will accept a one-off reduced payment as a full and final settlement of a debt and in extreme cases may even waive the debt completely. Mortgage assistance programs are also available by law and you should contact your lender to find out if you qualify.

6. Do What Needs Doing

Having dealt with hundreds of individuals in financial difficulty over the years the ones who get the most assistance from creditors and the best overall outcome are those prepared to help themselves the most. It is not for a creditor to suggest to you that you may need to consider relocating to a more suitably affordable postcode to save on rent or that it may in fact be time to curb your spending on non-essentials. If you own a property or properties then you need to seriously consider that you may have to bite the bullet and sell an asset on in order to save other assets or even prevent potential bankruptcy. Once you have been defaulted by a creditor or even worse been forced into bankruptcy, your options will be impacted both immediately and into the future so minimise the chances of either by being proactive.

Sun Mortgages offers a Debt Mediation service for borrowers in financial difficulty who require a third party to negotiate with creditors on their behalf. As a debt mediator we would handle all stressful collections calls and correspondence from your creditors and negotiate hardship assistance and improved repayment terms wherever possible. Phone us now to discuss your circumstances.