Jan 17

Personal bankruptcy activity declined in the December 2011 quarter by approximately 4%.

During the December quarter 7689 people either became bankrupt, or entered Part IX debt agreements or Part X insolvency agreements.

According to the latest information provided by ITSA (Insolvency and Trustee Services Australia) there were 8012 individuals declaring bankruptcy or entering some kind of a debt agreement during the September quarter.

The December figure is a reduction of two per cent on the December quarter in 2010.

In terms of annual statistics, bankruptcies were down four per cent year on year, while Part IX agreements were up 2.9 per cent, and Part X agreements were down 3.4 per cent.

May 17

Credit card users are now paying a lot more for their credit cards than they might realise.

With the cost of living escalating more and more households are resorting to using credit cards to cover the family’s weekly expenses. Many op for a low rate, balance transfer card  – however these cards are not what they are perceived to be. Recently, credit card providers have hiked “hidden” interest rates to 19.18 per cent and reduced honeymoon periods.

Based on information provided by Ratecity – financial comparison website, Credit Card holders are now paying an extra 0.42 of a percentage point on the average hidden interest rate after the honeymoon period.  Lenders market to borrowers products with perceived lower interest rates in order to attract more credit card holders with large balances. These balance transfer rates apply for a honeymoon period, before reverting to higher, permanent interest rates.

Research shows that honeymoon periods offered with credit cards have been significantly reduced, often without the knowledge of the credit card holder, some of these periods have gone to less than half of the Honeymoon period originally advertised by the card provider.

And there are 32 fewer balance transfer cards on offer since December, with just 21 offering a balance transfer interest rate of less than two per cent, seven fewer than six months ago.

Sixty-four per cent of Australian adults had at least one credit card by March.

Of those, 61 per cent intend to reduce the debt within six months, Veda Advantage’s most recent debt study shows. However with increasing costs of living and higher costs of credit, it is difficult to implement a debt reduction strategy for many.

GE Money’s GO MasterCard is the most expensive, slugging borrowers an interest rate of 21.74 per cent, while Citibank charges 20.99 per cent on three products and Macquarie Bank charges 20.95 per cent on two.

May 2

Escalation prices for electricity and other utility bills have contributed to over 1.1 million Australians being late in the payment of their bills over the past three months.Many have fallen into payment arrears.

Veda Advantage, a credit information agency, has conducted a survey that show the number of customers who missed a payment in any given quarter has escalated by 40 per cent over the past year.

On average, utility bill arrears have reached a record $500, said credit and collections agency Dun & Bradstreet.

This is nothing short of  a national crisis, and things are not about to get better any time soon.  NSW utility customers can look forward to a further 18% increase in costs from July 2011.

“It’s a really worrying situation because there is clearly a growing group of people having difficulty with utility bills as the costs continue to rise and it doesn’t look as though things are going to get any easier,” said Chris Gration of Veda.

While some service providers offer customers the opportunity to repay debts out on a payment plan, it is simply postponing the inevitable and not a real solution.

Apr 7

According to the bi-annual Debt Study conducted by Veda Advantage, 21% of Australians are experiencing difficulties with debt management, with one in five people interviewed admitting not being able to keep on top of their Debt Obligations.

These figures represent a 2% increase from the information collected six months ago.

Of the 21% who confirmed to experiencing difficulty with debts, 2% did not know how they would resolve their debt problems.

Of the 21%who were already struggling with debt, Veda said 28 per cent were likely to apply for more credit in the next six months.

It is a real concern that many borrowers who are already experiencing financial hardship are intending to deal with the problem by taking on more debt.

If and when positive credit reporting may be introduced, it will prevent people already with debt problems getting themselves further and further into debt.

The report found concern about the rising cost of living had increased markedly since September 2010 and people were worried about transport and petrol costs which rose 10 per cent over the period.

The new credit code came into effect at the beginning of 2011. This legislation imposes strict guidelines on lenders to prevent loans and credit from being extended to applicants who do not have sufficient income to service the debt. Credit reporting had been under review since January 2006

The Federal Government is intending to implement Positive Credit reporting in Australia in mid 2012. This will assist in identifying credit applications from borrowers who are already struggling with existing debts.

The study found that 57 per cent of people were managing their debts, although 47 per cent had cut back on groceries to repay debt, up from 43 per cent six months before.

The Australian Debt Study Report is conducted in March and September over the phone by Galaxy Research Omnibus.

This is the eighth report, which interviewed 1036 Australians.

Mar 15

Is debt getting you down? Bills keep piling up? Afraid of bad credit? It is important to get some professional advise to understand your options.

If you feel like your debt situation is getting progressively worse – the first thing to do is cut down your spending.

If what it takes is the shredding of credit cards then this is what you should do. At the very least stop carrying all the cards around with you. You may be surprised to know that credit card use in Australia is actually growing at its slowest pace in more than a year but the average credit card balance in December 2010 was still $3314.

However this does not apply to everyone, and many Australians are still spending more than they can afford.

There is a clear difference between good debt and bad debt. Good Debt is your mortgage or your investment loan – ie. debt that is actually generation an income or equity for the investor. Credit card debts and other lifestyle debts are known as ‘bad debt’ as they do not generate wealth.

Your home loan can be defined as essential debt, not one that you will be able to reduce in a hurry but hopefully one that you are able to afford. While good debt is tax-deductible and includes loans for income-producing investments such as real estate or shares, credit card debt will include your entertainment expenses – nice to have but not essential.

Pay off bad debt such as credit cards first, as they usually have the highest interest rates. If left to spiral out of control, they can cost a person thousands of dollars in interest over many years.

DEBT CONSOLIDATION

If you have several cards that have gone over the limit, it may be cheaper to roll these over to a single secured loan or a low rate credit card.

Remember that consolidating debts only works if your monthly repayments under the new loan are lower than your existing ones.

ESSENTIAL DEBT

Interest rates on secured loans such as home loans are much lower than other unsecured loans, this type of debt should be repaid only after your unsecured debt is paid.

“The most effective way to save interest on your home loan is to make extra repayments each month. Increasing the frequency of your repayments can also reduce interest.

By increasing your repayment just $200 to $2368 a month on a $300,000 loan, with a 7.25 per cent interest rate, you’ll save about $80,600 in interest and have your loan paid off in 20 years instead of 25 years.

DEBT AGREEMENTS

Debt Agreements are not an easy way out. They are a milder form of bankruptcy and should only be considered where no other solution is available.

BALANCE TRANSFER CREDIT CARD

If you’re like the majority, your card balance will be in desperate need of reduction.

Remember that lenders will first apply payment to the initial balance of a balance transfer credit card, rather than the new spending which attracts a higher interest rate.

As a general rule, you need to know the promotional rate, when it expires but more importantly the rate you’ll pay after expiration. You MUST NOT use your balance transfer card for further purchasing.

Feb 25

Data collated by Dunn & Bradstreet for 2010 shows that more Australian firms failed during 2010 than during the global financial crisis. The very small family business was the most to suffer.

It seems that closure of small businesses with fewer than five employees jumped by 46 per cent from 2009 to 2010 (to just over 4000 firms), as late payments continued to squeeze smaller companies. Businesses with staff numbers between six to 19 saw a 20 per cent increase in failures (to just over 5700).

These business failure numbers are even higher than the numbers recorded during the Global Financial Crisis when only 7,500 Australian businesses went under during 2008, and 8000 during 2009.

Many businesses were forced to close because they were not being paid timely by their customers.

Meanwhile, more than 160,000 new businesses commenced operation last year and some of these also closed down before the end of 2010.

Quite often what brings the business down is the lack of cash flow rather than lack of orders.”Some firms, particularly large organisations in Australia, have a policy of not paying until at least 60 days at least…there’s an entrenched corporate culture there. Small firms do not have the resources to dedicate to chasing accounts due and outstanding debts.

Business failures are not expected to ease in the near future, in fact the numbers could get worse before becoming better.

Feb 15

Teenagers and young adults living in the Hunter Valley are racking up huge bills and defaults with many facing bankruptcy.

It seems that the young have poor money management skills and can not keep up with the set repayments for mobile phone bills , credit card debts as well as car loans.

Easy access to small loans and the lack of responsibility and financial education is creating a generation a potential bankrupts.

Often parents step in to rescue their children from thousands of dollars of debt which they easily qualified for but are now are unable to repay.

It is to easy for the young to rack up huge mobile phone bills.

Close to 30%  of 18 to 24 year olds in the Hunter Valley have a credit card with a fast accumulating balance.

Financial Literacy has been introduced into the schools to address this issue. As the young are never off the phone, a pre-paid mobile is the best option for them.

Car loans is also a serious problem. Young people seem to enter too easily into very expensive car loan contracts without understanding fully the ramifications of these.

Examples included buying a car for $20,000, ending up with a loan for more than $30,000 once the interest and fees were calculated and the car being worth $2000 within a few years.

Despite this the debt still has to be repaid. A person finding themselves in this position often has no option but to declare bankruptcy.

It is hoped that better finance education in the schools will reduce the incidence of debt problems experienced by young adults going forward.

Feb 2

If you are permanently juggling credit card bills, increasing card balances, opening new credit cards to transfer balances from old – you need to STOP NOW!

Credit Card use can be very addictive. If you are someone who has a history of credit card misuse, it is important to solve the problem rather than just address the symptom.

It is important to start by reducing the number of cards you currently hold. Debt consolidation can offer such a solution. Consolidate all other cards into one and then start by working on reducing your debt balance.

Remember that Reward Programs are there to entice you to spend more, rather than give you something for nothing.  Therefore it is best to concentrate on the cheapest credit card not one with all the bells and whistles.

According to Dun & Bradstreet (D&B) debt research data, 38 percent of women are paying their bills on credit. This has increased by 3 percentage points year-on-year (comparing 12 months to September 2010) in contrast with men’s 1 percentage point rise.

This means that not only are we relying on our cards more heavily for the occasional big spend, but we’re guaranteeing ourselves higher debt with each monthly bill. Unless you are someone who clears your debt balances off credit cards at the end of each month – such spending habits are dangerous and not for you.

If you have a home with equity, do yourself a favor and consolidate your credit card debt into your mortgage. While the mortgage balance will increase somewhat , your monthly repayments should drop significantly.

If you still crave for a card you can carry in your wallet – take on a debit card. This will prevent you from spending money you do not have.

One in five women will be applying for a new credit card in the coming months, D&B found, so if you do find yourself comparing rates for a new lifestyle, make it count by remembering why you promised yourself to quit the bad habits this year.

The Insolvency and Trustee Service Australia provides information for those with unmanageable debt.  If you are not a property owner and are finding that you simply can not meet your monthly unsecured debt obligations – a debt agreement may be the solution for you. These agreements are regulated by Government and offer debt relief to those considering bankruptcy.

Jan 5

Futurists are predicting a “new conservatism” will take control during 2011 as Aussie households look to minimise spending in the face of escalating living costs.

Growing interest rates, utility bills and the lingering spectre of the GFC will bring in a simpler, more frugal lifestyle for most Australians.

Forget going out, designer clothes and fancy expensive holidays – the new cool are nights at home, home cooking, and certainly never paying full price for anything.

According to social researcher David Chalke,  the rising cost of living will prove to be the key to these changes.

“People will be more prudent due to a combination of uncertainty about the future and certainty that prices – particularly utilities, government charges and so forth – are going up,” he said.

In the face of rising costs of living and uncertainty people will opt for saving their cash for a rainy day.

Futurist Tim Longhurst said that people wanted to get back to basics.

While no one  really wants to go and live in a cabin – the truth is we like our plugged-in, hi-tech way of life but we want to temper it a bit.”

Australians are likely to incorporate old fashioned things into their busy modern existences rather than opting for a complete life overhaul.

There will be more vegetable patches in the back yard and more lifestyle simplicity.

Dec 7

As a home owner you have a distinct advantage when it come to debt consolidation. Irrespective of your credit history, if you have sufficient equity available in your property you should be able to benefit from refinancing your unsecured debts into your mortgage. Thereby you will be able to pay home loan interest rate on unsecured debts such as credit card balances and personal loans.  Some of these unsecured debts may be costing you as much as 25% pa.

Unfortunately if you are not a home owner, this option is not available to you. If you have a clean credit history you may qualify for a personal loan with a bank or building society to consolidate your unsecured loans into one. If you do not have a clean credit history – unsecured consolidation loans are simply not available.  Your options become limited to debt negotiation and possible a part 9 agreement (depending on seriousness of your situation).

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