Finding financial freedom after a part nine debt agreement
Entering into a part nine debt agreement is a serious life decision, but it’s important to remember that many people go on to live a financially successful life after paying off their part nine debt agreement, from owning their own home, to saving and staying out of debt.
A part nine debt agreement comes with many consequences, however sometimes it’s the best solution for individuals who have found themselves unable to bounce back from a financial shock, with considerable debts to their name
One of the main implications of entering into a part nine is that your agreement will be listed on your credit file for 5 years from the start of your agreement. The agreement itself lasts up to three years, meaning that once you’ve made it through the woods and have paid your debts, you may still find yourself unable to access credit for up to another two years.
Even though your debt burdens have been lifted and you are in a position to start again, it can be difficult to know where to start. We’ve compiled a few of our top tips for finding financial freedom after a part nine agreement.
Put your learnings to use
One of the silver linings of going through a part nine agreement is a big lesson in financial resilience, particularly, how to stick to a budget. Having gone through financial stress and come out the other side, your money management and budgeting skills will help enable you to make wiser financial decisions moving forward.
Stay in control of your finances by sticking to your budget and understanding your limits. There are lots of useful resources that can make this easier and provide that extra level of support, such as budgeting and tracking apps, and helpful podcasts.
Make sure you set money aside to pay off important bills and expenses, and avoid relying on credit cards or payday loans. Don’t get into a cycle of leaving them to gather dust and further tarnishing your credit history – if you can’t pay a bill, call your creditor straight away and try to organise a payment arrangement
Understand your situation
Whether you found yourself in financial hardship due to an unexpected life event, or by simply living beyond your means and overcommitting your financial capacity, you should have found yourself in a better overall situation now that your part nine debt agreement is over.
Take time to remember what caused you to enter into the part nine agreement, and where possible, make changes to try to minimise the likelihood of finding yourself in financial stress again.
Get back on track
It’s important that you familiarise yourself with your credit score, along with strategies to help improve it. Even though entering into a debt agreement will have subsequently damaged your credit score, you may still have valid requirements to access credit (for example, needing to purchase a car). However, even if you’ve improved your financial situation, you may find it difficult to get approval for a loan. Most lenders will decline your application when seeing a debt agreement recorded on your credit file, as creditors look at your credit history to determine how well you handle money, and a lack of positive activity speaks for your level of risk as a borrower.
Word of warning
Make sure you don’t commit to financing unless you have the money to keep up your repayments. Another important note is to avoid payday lenders – you will struggle getting finance through creditors such as the big four banks, but a payday loan is not a healthy alternative. It isn’t widely known, but even just applying for a payday loan, whether it is approved or not, may have a negative impact on your credit score.
However, all is not lost. There are alternative options out there with tailored lending solutions for your situation.
What are your options?
LoanU are an alternative lender, who specialise in helping people who have been through financial stress to find credit and move forward. Far from a payday loan, our loans can work to rehabilitate your credit score. If you qualify for our Rate Reducer loan, we will reward you with interest rate reductions in return for maintaining your payment history. Alternatively, LoanU also offer car finance solutions, to help you get back on the road and move forwards.
A manageable loan through an alternative lender such as LoanU can assist with your financial rehabilitation. If you can demonstrate the ability to manage your ongoing repayments, this will be reflected on your credit file.
Check if you qualify for a loan with LoanU, without damaging score, by entering your details into our qualification calculator.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or requirements. Therefore, please consider whether the information is appropriate to your circumstance before acting on it, and seek independent advice from a finance or legal professional if necessary.
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