Financial Distress and Your Credit Rating

When the times are good, hardly anyone asks the "what if" questions. What if I become unemployed? What if my business doesn’t do well this year? What if we can’t pay the mortgage or the credit cards? The very important message that comes from banks, financial counsellors and the Federal Government is that there is help out there.



There are places available to get free advice, such as mortgage brokers, so if you get into financial difficulty you should look it up.



Unfortunately for some people personal debt levels can reach a point of no return. Some people spend a lot of money. Sometimes more than we should have. Sometimes more than we earn. So when recessionary times hit, it can be a good time to take a look at your finances and make changes before it’s too late.



Australian investors are very different to investors from other countries, like the Swiss for example. The Swiss hardly ever use credit cards, and this is something Australians can learn from. Aussies don’t mind using the plastic, sometimes too much, and when that happens the lenders swoop in and enforce their delinquency rules.



Plenty of Australians have had to sell up and move to smaller homes due to the financial crisis. If this is you, be sure to borrow only what you can afford on your downsized home loan. Borrow only as much as you can afford to repay and keep something aside for emergencies.



It’s probably better to take steps to downsize voluntarily, which will protect your credit rating, rather than having someone do it for you. In addition to downsizing, there are other options available such as payment holidays. Under the Uniform Consumer Credit Code (Section 66) you actually have the right to apply for an extension to your loan term, or to reduce your regular payments, if you are genuinely in difficulty.



Loans for personal use, such as mortgages, are covered by the Code. Basically putting money into a business or investment property is out, but car loans, mortgages, personal loans, consumer leases or credit cards with debts less than twelve years old are in. There is also a size limit to the loans covered. The maximum loan size covered is about $280,000.



As a last resort, you can access your super. Accessing your super and then losing your home further down the track means you are left with no home and less super. But if you find yourself in a difficult situation, it is possible.



Avoid dodgy refinancing brokers and predatory lenders. The Australian Securities and Investments Commission has analysed two 'refinancing experts' in detail and found that these brokers charged fees up to 22 times the industry standard, in one case representing more than 20% of the remaining equity in the home.



The regulatory body has suggested only dealing with licensed advisors and taking your time to do proper research and make an informed decision.



Your local firm of Mortgage Brokers are standing by to help you with your next home loan at http://www.moneynet.com.au/. Contact us today. http://www.moneynet.com.au/