Whether it's keeping up with repayments on a home loan, juggling multiple credit cards or something else entirely, many Australians fall into the trap of debt.
For example, the 11th edition of the Genworth Streets Ahead report showed that first home buyers are more and more likely to be burdened with debt simply to make up a deposit on a home.
This included 19 per cent of respondents taking out a credit card for this express purpose, and 18 per cent of those surveyed picking up a personal loan to fund their home purchase. It can be risky, and result in unsustainable levels of debt that you can't keep up with.
However, when you do run into trouble with money, there are a wide range of services available to help you out. So where can you seek aid if managing money becomes a problem?
Commonwealth Financial Counselling (CFC)
This is a service from the Australian government, which is then delivered to people and communities through local government departments. It aims to "help people in personal financial difficulty to address their financial problems and make informed choices". Specific circumstances that can lead to this situation and people seeking out CFC are listed as follows:
- Loss of employment
- Falling ill
- Breakdown in family situation
- Taking on too much credit
From there, CFC can handle your case and manage creditors, open up smoother payment options for you, guide you through debt recovery and plan a budget. It's a sound way to get back on your feet, and teaches many lessons that can help you build up a savings account once again.
Remember though, generally this service is not there for lending money, legal or business advice, or specific financial planning advice. These are recovery services for when your debts become a bit too much to handle.
As the Australian Securities and Investments Commission points out, there is a free financial counselling hotline available during the week. This links you up with a relevant service in your state or locality, and can be a great first step on the path to debt recovery when you're working with a home loan.
Legal centres like the Consumer Action Law Centre in Victoria, Financial Rights Legal Centre in New South Wales and other state or territory equivalents may also be on hand to answer your call if you need. These are particularly useful for credit and debt advice, especially around your payment obligations.
Check the service
One important thing to keep in mind when seeking help with your finances is to do your research. Is the organisation going to work positively with you, or are they offering debt consolidation products? While this style of home loan reconfiguration can be useful in some cases, for many people it opens up a steeper slide into debt. Verify the credentials of the counselling or financial aid service before committing to anything further.
Of course, prevention is often the best cure. It's why a home loan calculator or credit card comparison can be vital before you commit to a line of credit. It allows you to move ahead with a clear view of how much something will cost you in the long run, and whether it is a manageable debt to handle.
This is particularly important with interest rates at near-record lows. They can't stay this low in the long term, and eventually people will have to contribute more in their regular home loan repayments.
Working with a clear plan and knowing exactly who you can call in times of need is a crucial part of taking on debt. Just as you should have a plan for when things go right, you need one for when things go wrong.