How will a Part 9 Debt Agreement effect my credit file?
Your credit file is a record of your financial habits and determines your risk rating for future loans. If you have any defaults such as late payments on your credit file, it can be difficult to secure a loan. It’s no wonder that you would want to protect it. If you are struggling with unmanageable debt, you might be considering a Part 9 Debt Agreement to help you pay them off.
A Part 9 Debt Agreement is a government legislated agreement which allows you to reduce the overall amount of debt you owe as well as freeze the interest and fees over the repayment term, which is usually five years. You will be left with one affordable, manageable repayment. A Debt Agreement will also be noted on your credit file for five years, much like a default.
If you are struggling to make your repayments and you are feeling the stress of being harassed by creditors, a Part 9 Debt Agreement may be an option to relieve this stress.
Do you already have defaults on your credit file?
If you are behind on repayments and being harassed by creditors, chances are you have at least one default on your credit file. A default will last for five years and while it is on your credit file it can be difficult for you to access credit through a loan or line of credit.
To check if you have received any defaults, you can request a copy of your credit file through a credit reporting body listed here. Your credit file will have a record of your debts and list any defaults and judgements against you.
What will a Part 9 Debt Agreement do to your credit file?
The day you enter a Part 9 Debt Agreement, a financial default is marked on your credit file, where it will be listed for five years. Every time you apply for a new loan or a credit card during this five year period, the creditor will be able to see that you are in a Part 9 Debt Agreement and will note you as a high-risk client, making it difficult for you to secure a loan.
However, this is also why it is a bulletproof system designed to protect your credit file. How? For five years, all of your unsecured debts will be repaid through an affordable agreement. This will prevent you from accumulating further defaults on those unsecured debts and impacting your credit file for more than five years.
At the end of five years, your unsecured debts will have been repaid and your credit file will be clear, allowing you to start fresh.
What happens once the Part 9 Debt Agreement is complete?
Once your Part 9 Debt Agreement has finished, the financial default placed on your credit file will be removed. It may take 3-6 months for your credit score to build back up as you show healthy financial habits.
Once you have repaid your debts via a Part 9 Debt Agreement, you can rebuild your credit score. For example, by applying for a small loan, one which you know you can afford the repayments for. As you pay this small loan off, you will build up your credit score, putting you in a financial position to be able to borrow from major financial institutions with no problem.
Common Concerns with Part 9 Debt Agreements
I want to buy a house within the next five years. It’s fantastic to set financial goals and they encourage you to figure out a budget and properly manage your money. When you complete your Debt Agreement your credit file improve and you will be one step closer to being able to apply for a home loan, achieving the homeowner dream!
I may as well just declare bankruptcy. Part 9 Debt Agreements do not carry the same restrictions as Bankruptcy, and if you have a high income or assets, a Part 9 Debt Agreement is a way of avoiding this.
I don’t need a Part 9 Debt Agreement; I just want to consolidate. A debt consolidation loan is essentially a personal loan that you take out to cover your debts and move forward just making the one repayment. However, if you have defaults on your credit file, you may not be successful in getting in a personal loan. This is when you should consider a Part 9 Debt Agreement, and begin your journey to financial freedom.
If you think a Part 9 Debt Agreement is an option for you and your situation, give us a call on 1800 00 3328. Our friendly Case Managers will be able to provide you with more information, advice and assistance.