Myths vs. Facts: Part IX Debt Agreements
Sometimes, when we are facing mounting debts we will look for any way out. One product or service that is floated around a bit is something called a Part IX Debt Agreement or a “Part 9 Agreement.” There are many half-truths and flat out lies being told about Part IX agreements online and through word of mouth. You may have heard some yourself. This post will separate all the myths about Part 9 agreements from the facts, so you or someone you know will understand what they really are and what impact they have on your finances.
Myth: Part IX Agreements are just consolidation loans.
Fact: Many disreputable companies market Part IX Debt Agreements as consolidation loan. If they are touting an “easy way out,” it’s usually too good to be true. Some of these agreements may indeed be consolidation loans or have features like them. In the strictest sense, they are not one and the same. A Part IX Debt Agreement is a binding contract between a debtor and his or her creditors to pay off their obligations in agreed upon instalments and time period. This is overseen a federal body called the Australian Financial Security Authority. Every case is different and will be taken into consideration on its merits.
Myth: Part IX Debt Agreements is better than applying for bankruptcy.
Fact: While the terms and conditions aren’t as harsh as a bankruptcy, a Part IX agreement is seen as an “act of bankruptcy” according to Commonwealth law and the Bankruptcy Act. To financiers and lenders, this is just as bad as having a full bankruptcy on your credit history. It will show up on a credit history for at least five years, and will go on file at the National Personal Insolvency Index. It’s quite likely people who’ve ever been party to a Part IX Debt Agreement might be considered a high risk by banks and lenders for quite a long time.
Myth: I can start applying for financial products and loans as soon as I’ve fulfilled the agreement.
Fact: It’s highly unlikely car or personal lenders and banks will simply lend out money to people who have fulfilled a Part IX debt agreement. There are some predatory lenders who will, though. You should be wary of these lenders who slap enormous interest rates and completely unfavourable terms on these people.
Generally, responsible lenders will not lend money to people formerly on Part 9 Agreements unless they have shown improvements in their financial situation. This usually includes a having been released from the Agreement for a minimum of twelve months. Other lenders look for good banking behaviour, such as no overdrafts or direct debits for at least six to twelve months. They also look for people in regular paid employment and people with a good residential history who are in good standing with their landlords. Other financial companies consider the ability for people to pay back loans based on their available income after they factor in electricity, gas and water bills and rent or mortgage repayments. It may be a hard road, but people who make a real effort to get their finances back on track will find more opportunities will come available to them.
Always know the facts
Smallloans.com.au wants all of its customers to know the facts about personal finance. We are a responsible lender with strict lending practices and don’t want anyone to come into financial harm through getting incomplete or flat-out false information about financial products or services. Our small cash loans are a way for people to get out of financial strife, not into it. Every decision about your financial future can’t be taken lightly – so always get the facts!