During the COVID-19 pandemic and government restrictions, many of us felt relieved when we heard our bank or credit card company was offering customers a repayment holiday. This was to relieve financial hardship. Right now, many of those holidays or payment freezes are coming to an end.

So, what happens next?

The reality of reduced hours or being out of work is still a reality for many. Even so, there are ways to navigate around your debt or reduce it.

If you are still experiencing hardship, need greater flexibility, or wish to eliminate the debt completely, here are the next steps you can take to make sure your finances don’t take an even bigger hit.

Budgeting and Downsizing

If you’re always left wondering “where my money goes” each month, you need a budget. This should be your opening move in trying to tackle debt. Errant spending patterns such as a couple of dollars here and there all adds up. Buying a $3.50 latte each morning before work will cost about $910 a year – all of which you could put toward reducing debts.

You can “train” your NetBank app to figure out where your expenditures go each month and start looking at reducing them. A 250g pouch of ground coffee costs about $12 and lasts two weeks – pour your brew into a keep cup and reap the savings. Do the same for unused subscriptions, memberships, and other discretionary expenditures. You’ll be surprised how much you can save.

If you’re also struggling to pay rent on a three-bedroom townhouse in a leafy suburb on a single income – move somewhere smaller and more affordable. The reality is that your debts need tackling and if you can reduce those debts through unlocking surplus income, take every path available to you.

Refinance or consider debt consolidation

If you have paused numerous credit cards and they’re all resuming at the same time, you may want to consider a refinance or debt consolidation. By taking out a personal loan, you can pay off all your credit card balances at once and repay the debt over a fixed term (usually five to seven years) until the balance reaches zero. Of course, you would close the accounts as soon as you pay them off to avoid annual fees and the temptation to use them again.

But why a personal loan? Because personal loan rates are much more competitive than credit cards (sometimes up to 10%p.a. more competitive) and are easier to budget around, provided they have a fixed interest rate. They also don’t keep adding interest the longer you don’t pay off the balance – better yet, you can’t add more to the balance by purchasing additional items or paying bills (or worse yet, paying other credit card balances or taking out high interest cash advances.)

When shopping around for personal loans, remember to look for comparison rates over interest rates – comparison rates show you the total cost of a loan including most fees.

Reapply for financial hardship

Though you may have applied the first time around, you can reapply for financial hardship if you are struggling to make ends meet. However, you should be warned that additional requests for hardship waivers will make every subsequent request more difficult. Credit card issuers and banks may grant you a second extension or payment freeze. The downside is they’ll apply much more scrutiny to your application. Though it may be less likely, if you are genuinely in hardship, they may grant you a second extension. If you apply for another extension after that, you’d have to be in extremely dire straits for them to give it the green light.

You should always consult a financial professional or adviser before applying for financial hardship. Applying for or extending your credit terms may have an impact on your credit history. Your credit history has a record of all your applications for credit, whether they were accepted or not, how much you owe, how much you pay off each month, and how close you are to your credit limit. This is a relatively new scheme, known as comprehensive credit reporting.

Your credit history is also a record of failures to pay a bill or repayment, known as a default. Defaults hamper your ability to gain credit approval for up to seven years. This doesn’t just apply to big asset credit like mortgages or car loans – it even extends to little things like mobile phone contracts, so be careful!

Negotiate your debts

Using a specialist debt negotiator can help reduce your debts – by half or even more. A negotiator will have years of experience and insight into the National Consumer Credit Protection Act, bank contacts, negotiation skills, and insider knowledge to leverage substantial debt write-offs for their clients.

The negotiation process usually doesn’t cost anything up front and is geared toward maintaining or even improving your credit score and credit history. Most well-regarded professional negotiators charge only if they are successful – a guarantee that they’re able to do what they claim.

Is your repayment holiday coming to an end? Do you want to know how debt negotiation could work for you? Contact Laurence at [email protected] if you want more information on debt negotiations. You could be debt free within a month!

About the Author

Laurence Hugo is the director of Credit Mediation Service P/L and a highly experienced negotiator with three decades of banking, debt management and marketing experience. Through his work at Credit Mediation, he has successfully waived over $83 million for clients all over Australia.

This article should not be considered legal or financial advice, but as a general guide only. If you are facing legal recovery action, please consult a legal attorney to assist you. For further information on how to have your debts cut by half or more by a specialist negotiator, reach out to us on [email protected] or contact us on 1300 490 030.