What Happens if You Fail to Pay your Loan on Time

When you apply for a loan, part of the credit checking process is effectively the lender assessing your ability to repay. If you have a strong credit history and a high credit score, lenders will probably decide that you are likely to be a good borrower and repay on time, based on how much you are looking to borrow and over what period. One of the benefits of applying for a loan is that you can decide how much you want to apply for and how long you want to pay it back. If your application is accepted, this degree of control means, at least when you take out the loan, you should know you are able to afford the repayments over the specified period.

Anyone can experience financial difficulties, and for a variety of reasons, which may mean you are unable to make some of your repayments on time. What are the consequences of this?

You’ll Hear from Your Creditor

The first thing you can expect to happen if you miss a payment is to receive a call and/or a letter from your creditor. You also may have incurred a charge depending on the terms of your credit agreement. If it is your first missed payment then you will be able to catch up by making the payment right away, along with any additional charge. Your creditor may also seek assurance from you that you will make all future payments on time, and if a payment has been missed due to a lack of a direct debit they may insist one is set up.
If you miss one payment but pay within a few days, this usually won’t be noted on your credit report, though you should still make a point of paying on time.

Paying Two Weeks Later & Damaging Your Credit Score

If your payment is more than two weeks late then a notice will be placed on your credit report, and your credit score will start to be affected. At this point, you will have received correspondence from your creditor on more than one occasion, and you might have even had an escalation letter beyond the standard request for payment. Some creditors will simply remind you that your payment is now overdue, and give you a specified period to catch up before taking further action. Note that if you are given time to pay a late payment will still be recorded on your credit report.

“If your payment is more than two weeks late then a notice will be placed on your credit report, and your credit score will start to be affected.”

Escalation & Default

If you fail to make payment with your creditor your account may then fall into default, this usually occurs when your payment is 60 days late. This is considered a serious financial matter, and having a default on your credit file can lead to difficulties in securing credit for a number of years. As well as sending you a default notice, you may also hear from your creditors’ collections department as they seek what they are owed. The collections department may wish to meet with you face to face to discuss your account, although you are under no obligation to do so and can correspond by telephone or in writing if you wish.
Your default notice will specify a time in which you need to make the necessary repayments and schedule future payments before the matter will escalate further.

Letter of Demand

A letter of demand will be sent following the expiration of the time specified on your default notice. The default notice will usually specify 30 or 60 days to pay, meaning when you receive a letter of demand you will be 90 to 120 days behind with your payment. When creditors reach this stage they will usually be seeking full payment of any outstanding amount. If you are not in a position to pay the full amount, you should still contact the creditor to try to come to a repayment arrangement.

“The default notice will usually specify 30 or 60 days to pay, meaning when you receive a letter of demand you will be 90 to 120 days behind with your payment.”

Court Action & Enforcement

Continuing failure to pay may result in your creditor escalating your account through the courts in order to legally enforce payment. Should you ignore the Statement of Claim from the court or admit to owing the debt, or contest the debt but the court finds in favour of the creditor, then you will need to repay. Whatever a judge decides you owe may include fees and interest from the last repayment due date.
Depending on your actions at this stage, you will at the very least have a court writ on your credit file, though if you still fail to pay the court may apply to have you declared bankrupt.

Missing Payments: It’s not worth it!

When you took out your loan, you did so with good intentions and planned to ensure you always made your repayments on time. If you are now facing financial difficulties and may struggle to make repayments, speak to your creditors to see what options and help they may be able to provide. This seems like an intimidating step, but many are surprised to find that creditors are sympathetic and reasonable when their customers face financial difficulties.
Missing payments and failing to repay your loan can have serious financial consequences both now and in future, and can damage your ability to acquire credit for many years.



What you need to know

Constancy Wealth Management is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 AFSL 232706 and Australian Credit Licence 232706. This information does not take your circumstances into account, so read the relevant disclosure documents and consider what’s right for you. If you acquire an AMP product or service, AMP companies and/or their representatives will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Ask us for more details.

This post contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information

Will Debt Consolidation Make You Spend More or Less?

There are many questions to ask and things to ponder prior to taking out a debt consolidation solution. One of the major considerations you will need to make involves a potentially big change to your lifestyle, namely taking control of your spending and changing the way you approach financial management.

If you’re at the stage where you’re considering a debt consolidation solution you probably already know what it is and how it works. The big question is the one asked in the title. Will debt consolidation make you spend more or less than you currently do? While the answer is not necessarily a straightforward one, the good thing is it is in your hands.

Using Debt Consolidation

There are three possible scenarios when it comes to using debt consolidation:

1. You use the debt consolidation to clear your existing debts and work towards a more responsible financial outlook.
2. You can use the debt consolidation to free up your access to credit and build up your debts once more.
3. Despite having a debt consolidation solution in place you continue to apply for and use new credit.

While the ideal outcome from debt consolidation is clearly the first scenario, many people do fall into the trap of spending big again. When considering debt consolidation you need to be prepared to take the step from big spender to wise spender. You might be able to make repayments and manage any accounts you open or continue to use while you have a debt consolidation loan, in which case you might need to consider whether such a solution is the right one for you.
Now that we know the possible outcomes of debt consolidation and that ideally you want to spend less, we can look at the strategies that might help you.

‘One of the major considerations you will need to make involves a potentially big change to your lifestyle, namely taking control of your spending and changing the way you approach financial management.”

Budgeting Effectively

If you’ve chosen debt consolidation as an effective debt management strategy, it is likely you have already begun to think about financial planning and budgeting. If not, now is the time to start. Sit down and plan your expenditure and ensure you are in a position where you will not need to rely on credit while paying off your consolidation loan.
If you need help with budgeting or financial planning, contact us today.

Closing Your Accounts

When you take out a debt consolidation loan they will pay your creditors directly so all you need to worry about is making your weekly or fortnightly repayment to us. Once we have done that, if you think you may be tempted to use your access to credit then close your accounts. There is no benefit to be had from having open credit accounts that you’re not going to use, and in some cases, having dormant accounts can even be detrimental to your credit score.
Close any remaining credit accounts while you’re paying off your consolidation loan. When you become better at managing your finances or need access to credit again in the future, you can apply safe in the knowledge that your credit report and history should be in good standing.

“There is no benefit to be had from having open credit accounts that you’re not going to use, and in some cases, having dormant accounts can even be detrimental to your credit score.”

Maintaining Self Discipline

As much as you can budget and close any open credit accounts, in large part managing your finances is going to come down to your own self-discipline. If your credit score means you can’t access credit then in some respects this may represent a positive, as you will be unable to open additional accounts. However, you will still need to manage your spending, and if you do maintain access to credit be very careful about how you use it, if at all.
Debt consolidation can be an excellent solution for those looking to ease debt concerns or simply make managing their finances easier, but whether it works is largely down to you. Make it work for you and you could be on the right track to a brighter financial future, but if you fail to be sensible you could potentially find yourself with debt problems mounting once again.


What you need to know

Constancy Wealth Management is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 AFSL 232706 and Australian Credit Licence 232706. This information does not take your circumstances into account, so read the relevant disclosure documents and consider what’s right for you. If you acquire an AMP product or service, AMP companies and/or their representatives will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Ask us for more details.

This post contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information

4 Debt Consolidation Traps to Avoid

As the use of credit services and products is today widely accepted as a part of life, millions of people in Australia and around the world hold debt from credit cards, personal loans and various other products. For many, accumulating debt is not a problem, as what they take on is easily manageable and they are able to meet their repayment obligations without trouble. However, financial circumstances can change or people can quickly stack up debt without considering how they will cover their repayment obligations.

Should this happen, debt consolidation can seem like an ideal solution, but if it isn’t done with careful consideration and planning it can make your debt problem worse, or leave you paying more money to clear debts than you would have originally. Debt consolidation is not a debt solution in itself, but is rather part of a process individuals can use to manage their debt more effectively or work towards becoming debt free.

Here are four debt consolidation traps you should look to avoid.

1.      Not Acknowledging You Have a Debt Problem

If you’re looking to use debt consolidation as a short-term, knee-jerk reaction as you start to struggle with your various debts, then you probably haven’t yet acknowledged you have a debt problem at all. Unless you have used your credit services and products for a ‘big ticket’ purchase, your debts will have built up over some time. While financial or personal difficulties may mean you have needed to use credit for subsistence, often debt has built up owing to people living beyond their means and not being careful with their finances.
Speaking to a debt counsellor is a great first step if you are struggling to identify or come to terms with what has caused your debt problem initially. Those who do not acknowledge they have a debt problem will often use a consolidation loan to clear credit card debt then immediately start spending on their credit cards once they have access to the full balance once again, and the debt cycle continues. Some lenders’ terms and conditions for debt consolidation loans will even ask you to acknowledge that you will not apply or accept access to further credit while paying off the loan.

“Speaking to a debt counsellor is a great first step if you are struggling to identify or come to terms with what has caused your debt problem initially.”

2.      Stacking Up New Debt Too Soon

Debt consolidation isn’t just a solution for those struggling to meet their repayments, it might be an option for those that can manage their debts from a financial perspective, but simply want to have one payment or fewer payments to make rather than several. Individuals using debt consolidation for this purpose will often retain their access to credit. This isn’t necessarily a problem, but those doing this should be mindful of spending on their credit cards and using other credit too soon.

“Debt consolidation isn’t just a solution for those struggling to meet their repayments, it might be an option for those that can manage their debts from a financial perspective, but simply want to have one payment or fewer payments to make rather than several.”

From both a financial perspective as well as the potential damage utilising more credit could do to your credit score, it is important to adhere to this point and continue to manage your debt commitments carefully. Try to utilise the mind-set that clear balances do not mean you have a clean slate, and that the debt consolidation loan you have is still a considerable commitment that should be your first priority.

3.      Not Fully Researching Your Options

There are numerous options available to consolidate debt and you should consider them all to ensure you choose the right option for you. The solutions you may be able to utilise include:

• Secured and unsecured personal loans
• Credit card balance transfers.
• Debt management plans.
• Debt negotiations and settlements.

Shopping Around

It is always worth shopping around for the best consolidation terms and considering your options. If you need to, speak with a financial adviser or lenders to help calculate what you can save using each consolidation solution. Once you have considered all options and compared them to what you are currently paying to your range of creditors, you will be in a much better position to assess whether debt consolidation is a worthwhile solution for your circumstances.

What to Consolidate

You should also remember that you don’t necessarily need to consolidate all of your debts. If you have a credit card or a loan that has a great interest rate, you can leave that out of your consolidation plan, only consolidating the debts that you can move to a more competitive, money saving rate. Overall, you need to make sure debt consolidation is really going to make a difference to your financial outlook, and not leave you paying off more over a longer period.

“You should also remember that you don’t necessarily need to consolidate all of your debts. If you have a credit card or a loan that has a great interest rate, you can leave that out of your consolidation plan, only consolidating the debts that you can move to a more competitive, money saving rate.”

Know What You’re Getting Into

The final consideration to make when researching is to beware of all the terms and conditions of whatever consolidation solution you choose. A credit card balance transfer might sound like a perfect solution, but what are your options when the 0% promotional balance ends after 12 months? ‘Get another promotional credit card’ might be the first thing to come to mind, but what if your credit rating has suffered and you can’t get one? Not only should you be sure of what you’re getting into, but if you do utilise balance transfers in this way you should make sure you’re taking advantage of the promotion to pay down as much of the balance as possible while not accruing interest.
Check that debt consolidation loans aren’t subject to penalties or fees if you’re able to repay early, whether the interest rate is fixed or variable, and whether your debt management plan or settlement means creditors will no longer be hassling you for payment.

4.      Not Having a Financial Plan

Alongside not acknowledging you have a debt problem, not having a long-term financial goal is arguably the biggest debt consolidation trap of all. This will likely lead you back into the debt cycle or being unable to apply for and access credit again in the future. It is particularly important to have a robust financial plan in mind if you are using debt consolidation as a means of clearing your debts in full.
Your plan should start from the moment you begin considering consolidation and looking at your options, so that you commit to an affordable repayment plan but one that will also reduce your debts in the quickest possible time. Create a sustainable budget for your lifestyle so that you understand how you can enjoy life and meet your financial needs and obligations without turning back to debt now or in the future. As with the acknowledging of debt, if you are struggling with this step finding a debt and credit counsellor may be of help. Once you get started with your financial planning, you’ll probably find living with a budget and fresh monetary perspective easier than you imagined, and start to enjoy the benefits of a debt free financial future.

“Check that debt consolidation loans aren’t subject to penalties or fees if you’re able to repay early, whether the interest rate is fixed or variable, and whether your debt management plan or settlement means creditors will no longer be hassling you for payment.”

Debt consolidation is a great solution for managing debt, if used correctly. Contact Constancy Wealth Management to discuss your debt consolidation requirements and decide whether this is a suitable credit product for you.

What you need to know

Constancy Wealth Management is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 AFSL 232706 and Australian Credit Licence 232706. This information does not take your circumstances into account, so read the relevant disclosure documents and consider what’s right for you. If you acquire an AMP product or service, AMP companies and/or their representatives will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Ask us for more details.

This post contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information

How to Slow your Spending with Cash

Although you may have a budgeting plan to try to help you manage your personal finances, you may still be struggling to control your spending. One common reason why many people struggle to measure and control spending is that they buy everything on a debit or credit card. Why should this make any difference?

The Psychology of Spending

When you buy something using a debit or credit card, you aren’t actually parting with anything on a physical level, you simply hand your card over or even place it in the reader yourself and the money is transferred from your bank or added to your credit card balance. With credit cards in particular, spending can be fuelled if you find yourself on a “Buy Now, Pay in 18 Months” promotion and are only thinking about enjoying your purchases now and not necessarily about how you will repay at the end of the promotional period.
Numerous sources, including the highly respected Psychology Today website, have published studies that seem to confirm that we find it easier to spend when we’re using a card versus actually handing over cold, hard cash.
In general, the overview such studies provide is as follows:

• Cash is real, tangible, and something we identify as being valuable. We feel the emotion of spending when using cash.
• Debit cards are less real, in that we know when we hand over our card the money will leave our bank account, but it often isn’t something we’ll consider until we check our bank balance later.
• Credit cards are deemed the ‘least real’ means of spending, as it isn’t our money. Yes, our credit balance will increase, but it can often feel as if we’re not spending anything at all.

In summary, the further away we as consumers move from using ‘real’ money, the less mindful we’re likely to be of how much we’re actually spending.

How to Use This When Budget Planning

You plan a budget for yourself each month but still overspend because you only use your cards. Could the solution really be as simple as going to the bank each month and taking out the cash? The answer is that it might well be.
Consider adopting this plan and see how it helps you to slow your spending with cash:

1. Complete a monthly or longer-term budget as you usually would.
2. Confirm how much money you need to cover anything that must be paid directly from your bank account, such as direct debits and other regular payments. Include in your budget r essentials such as food.
3. Deduct this and any amount you want to save from your total monthly incomings.
4. The figure you are left with represents your total disposable income for the month.
5. Withdraw this sum from the bank and have the cash whenever you want to buy something.

Additionally, it might be worth asking for the money from the bank in higher denominations, as the psychological effect of ‘breaking’ a larger note may help to control your spending. Notice the difference of feeling between having a $100 bill in your pocket and five $20 bills instead.

Why Using Cash Can Help

By using cash for the month, you will quickly get used to the feeling of ‘when it’s gone, it’s gone,’ and find yourself being much more mindful with what you spend things on. How you deal with your saved money at the end of each month is then up to you. You may choose to deduct what you have left from the money you will withdraw next month, or to put it in a separate savings account.
Using cash can help you to slow your spending and make your budgeting much more successful.



What you need to know

Constancy Wealth Management is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 AFSL 232706 and Australian Credit Licence 232706. This information does not take your circumstances into account, so read the relevant disclosure documents and consider what’s right for you. If you acquire an AMP product or service, AMP companies and/or their representatives will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Ask us for more details.

This post contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information

How to Unlock a Debt Free Future

Debt and credit is such an everyday element of modern life that it’s easy to feel like you couldn’t exist without it. However, millions of people live happy lives without holding any debt at all, or with their only debt being in the form of mortgage repayments.

Whether you’re currently in debt and looking to escape the debt cycle, or simply want to learn some tips to help you avoid major debts in the future, these principles will help you to live a debt free life.

Commit to Paying Your Debts Quicker

When it comes to unlocking a debt free future there are two steps to take. The first is to pay off your existing debts. The extent to which you need to do this will depend on the level and types of debt you currently hold.
Simply not accruing more debt alone won’t make much difference, as the interest will still be building up; you need the dual focus of stopping your spending while saving elsewhere in order to pay your debt down quicker and more effectively. Committing to this can be very powerful and make a big difference to your life.
Once you’ve started to deal with your debts it is time to change your mind-set so you’re trained to treat debt with disdain in future.

“Whatever triggers your spending, look to remove it from your life”

Avoid Temptation

Avoiding temptation is about more than simply telling yourself to say no, it’s about identifying the emotional side of your spending habits and finding the underlying cause of why you spend. Do you buy things you want rather than what you need to make yourself feel happy? Do you simply feel the need to spend when you have access to cash or credit?
Whatever triggers your spending, look to remove it from your life. You might do something simple like not buy anything you see until 24 hours later, having had the time to consider whether you need it, or alternatively you might go as far as to give a credit card to a friend or family member to avoid using it.

When you’re Debt Free, Save

Changing your spending habits and training yourself to avoid temptation isn’t something you should forget once you’re debt free. While it will undoubtedly feel great to have a certain amount of disposable income to hand each month, commit to saving as high a percentage of this as you can. People often take on debt for an emergency because they don’t have savings available, so ensuring you have some capital put away could help you avoid falling into debt once again in the future.

“Although the accounting definition of bad debt is monies that cannot be recovered, you can have your own personal definition.”

Treat All Debt as Bad Debt

Although the accounting definition of bad debt is monies that cannot be recovered, you can have your own personal definition.
If you’re taking on a debt that is going to cost you additional money on top of what you borrow in interest, then treat it as a bad debt as much as possible. You can also take it further and say credit cards are a bad debt, even if you intend to pay the full balance each month therefore avoiding any interest.
Debt free living is possible, you just need the positive mindset to help you to clear your debts and prevent yourself from needing to take on additional debts in the future.




What you need to know

Constancy Wealth Management is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 AFSL 232706 and Australian Credit Licence 232706. This information does not take your circumstances into account, so read the relevant disclosure documents and consider what’s right for you. If you acquire an AMP product or service, AMP companies and/or their representatives will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Ask us for more details.

This post contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information

How to Save Money on Home Improvements

For most people, buying a home represents the biggest and most expensive thing they will ever purchase. As with any asset, when you make such a financial commitment to something, it makes sense to ensure it remains intact. When it comes to our homes that will usually mean ensuring we invest in home improvements from time to time. While we may invest in home improvements out of necessity, we may also do so because we want to increase the value of our home, perhaps with an eye on selling it later, or to enhance our lifestyles.

Home improvements can often prove costly. How can we save money on them?

Do What You Can Yourself

Many simple home improvement jobs, such as painting interior rooms, and even some bigger jobs such as refitting a bathroom or external maintenance, can be done by yourself. This means you will only pay for any materials you need, rather than for materials and the cost of paying someone to do the job. When safety issues may be involved, such as with electricals, you should always look to work with professionals, but think about the things that you can do yourself before calling in a contractor.
For some jobs, you may be able to start projects yourself and then only get a professional involved when the work becomes more difficult or beyond your own capabilities. However, ensure you pre-plan this and discuss with a contractor beforehand. Avoid only calling them up if you try to do something yourself and it all goes wrong.

Get Several Quotes

When you do decide you need a professional to do the job, be sure to get several quotes so you know you’re getting the best deal. It is also worth asking friends and family members for their own recommendations, so you know you are getting a trustworthy contractor coming to work in and on your home.

Buy Materials Yourself

Even if you find a recommended and trustworthy contractor, it may still be cheaper to buy the materials yourself, and you have the added bonus of having checked their quality so you’re happy with what is being used. Check with contractors before you hire them that they are happy for you to provide the materials yourself. Most will understand that you’re looking for the work to be as affordable as possible and not have a problem with this.
For an added benefit, if you’re planning a home improvement project far in advance, look to buy materials when trade stores have discounts or sales promotions taking place.

Hire Tools Rather Than Buying Them

If you are doing any work yourself, and only need certain tools to use once, perhaps even for only a couple of hours, it makes more sense to hire rather than to buy them. Workers who rent out tools will also be able to help you choose the one you need and give you safety tips and advice for efficient use, which you won’t always get from making a purchase, particularly if you don’t read the manual or speak to someone at the store you buy it from.
If you would like to buy something to possibly use again, then look at local sales and even online at sites like eBay to see where you can buy good as new tools at a reduced price. You will find many people who were once in your situation and are looking to sell having used their tools only once or twice, but happy to take whatever they can to sell them.

Keep and Store Old Materials

When you next repaint a room in your home, and have half a tin of paint left at the end, keep it. Whether you decide to paint another room the same colour, or simply have one eye on needing to refresh the room in a few years, being able to use the remainder of the paint will prove very useful and save you money.
Both small and large cuts of wood, particularly more expensive hardwoods, should be kept too, while it is always useful to have a box of screws, nails, and other small accessories that you may need to use at various times.

Buy Unclaimed Paint

Colloquially known as ‘oops’ paint, paint that has been mixed incorrectly, or that customers have ordered in a specific colour but never collected from the store, is often available at generous discounts. Another option is to find recycling outlets where people can take old or unused paint, and then find out whether they sell the paint or have passed it onto someone else to sell. Again, this will be available at a fraction of the store price, and maybe even free.

How to Save Money on Home Improvements

Follow these tips when planning your future home improvement projects and you may find yourself able to save money.


What you need to know

Constancy Wealth Management is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 AFSL 232706 and Australian Credit Licence 232706. This information does not take your circumstances into account, so read the relevant disclosure documents and consider what’s right for you. If you acquire an AMP product or service, AMP companies and/or their representatives will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Ask us for more details.

This post contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information

How to Pay off Credit Card Debt

A March 2015 report from Moneysmart estimated Australian credit card debt to stand at $33billion.
While the average debt in the same report was cited as being $3,300 per cardholder, there are sure to be many Australians whose credit card debt is way above the average, with others well below it, or even holding credit cards that they never use.

Defining Credit Card Debts

Defining your credit card debts is easy; simply take all of the debt you currently owe on credit cards and on store cards and add it up to discover your total credit card debt.
While this may give you a figure that leaves you taken aback, your balances are merely what you owe without considering interest.
It might be the case that your true level of credit card debt is far higher, and you may ultimately end up paying a lot more in repayments and interest, particularly if you’re not able to pay much more than the minimum every month.

Why Credit Card Debts Matter

Credit card debts are significant for a number of reasons. Firstly, they may have a personal impact on your life.
From a financial perspective, your credit card debts may also be a hugely influential factor on your credit report and for your credit score.
Not only can creditors see what types of credit you can currently access, they can also view your credit limit and repayment history. If your credit card debts are so high that you are struggling to meet your repayment obligations, or you have already missed some payments, this will be visible and will negatively affect your credit score.
While some people maintain a particular balance on credit cards and are able to keep up with repayments, for other people, credit card debts can become overbearing and start to affect their lives.
There are several options for people looking to pay off their credit card debts.

‘From a financial perspective, your credit card debts may also be a hugely influential factor on your credit report and for your credit score.”

First, Stop Spending!

It may sound an obvious piece of advice, but it is essential to stop spending on credit cards before you can even begin to deal with the debts you have on them.
If you feel that might be easier said than done, then you’re probably not alone.
When you don’t feel you have the discipline to stop spending while still having the credit cards in your pocket, what are the options available to you?

• Cut the card up so you cannot use it.
• Explain to a friend or family member what you’re planning, and ask them to keep hold of the card for you.
• Place the card in a bag or box filled with water, and then put it all in the freezer.

Granted, some of those might seem like extreme lengths to go to, yet they may be necessary if you’re serious about paying off your credit card debts.
Once you have stopped spending you can then start to explore the options for paying off your credit card debts.

Carry on What You’re Doing

If you have stopped spending on your credit cards, it means you’re no longer growing your balance. Depending on how much you owe, you might be able to bring your debts down quickly just by continuing to pay towards your balance each month.

Pay More

One of the big problems many face with their credit card debts is that they only pay the minimum payment each month. This in turn leads to interest continuing to build up and means that it will take far longer to repay the balance.
The Moneysmart article we referred to earlier cites the following example:

• On a credit card debt of $4,400, only making the minimum payments each month means it would take 31 years to repay the debt in full, and pay nearly $15,000 in interest alone.
• In contrast, by paying $216 a month the credit card debt would be cleared in two years.

Even if you can only commit an extra $50 – $100 a month to paying your credit card debts, this can make a big difference both to the time it will take to clear the balance as well as the interest you will pay.
By continuing to pay only the minimum payment, you are likely doing little more than servicing the interest, which is why clearing the balance will take so long.

Speak to Your Creditors

If you have already reached the point where you’ve missed payments or you are struggling to meet your obligations, then it might be time to speak to your creditors and come to a repayment arrangement.
It may be a good strategy to look at what you can afford to repay per month and then spread this across the various credit card debts you hold. You could look to commit the largest sum of money to the card with the highest balance or interest rate and look to pay this off first. When speaking to your creditors you may also be able to arrange a freeze on your interest so you do not incur any additional charges.

Consider a Debt Consolidation Loan

If you can feel your credit card debts creeping up on you, but you have so far managed to keep up with the repayments, it might be worth considering a debt consolidation loan.
It is advisable to look at this option at the earliest opportunity, as missing payments may damage your credit score and reduce the likelihood of you being successful when applying for a loan.
Someone with numerous credit card debts may be able to use a personal debt consolidation loan to reduce their repayments to one regular outgoing, and also relieve themselves of the stress of dealing with several creditors at a time.
If you take out a debt consolidation loan they can pay off your credit card debts right away, so you can focus on fixing your finances and paying your fixed repayment sum to us.

“If you can feel your credit card debts creeping up on you, but you have so far managed to keep up with the repayments, it might be worth considering a debt consolidation loan.”

Paying Off Your Credit Card Debts

You have several options available when it comes to paying off your credit card debts, but the first step should always be to stop spending on your credit cards and to take a different outlook to personal financial responsibility.
Once you are able to do this you will have a much clearer picture of the best option you have for paying off these debts.



What you need to know

Constancy Wealth Management is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 AFSL 232706 and Australian Credit Licence 232706. This information does not take your circumstances into account, so read the relevant disclosure documents and consider what’s right for you. If you acquire an AMP product or service, AMP companies and/or their representatives will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Ask us for more details.

This post contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information