JobKeeper is planned to end in September.
Unfortunately many struggling people and businesses who rely on JobKeeper to survive are going to find themselves with limited options and no support system.
The reality is Australia has entered the beginning stages of a recession which will outlast the health crisis caused by the pandemic. While nations like Brazil, India and USA struggle to reduce the spread of COVID-19, economies like Australia’s will continue to suffer the effects of a global recession. Additionally, in September most Banks are expecting borrowers to resume payment, and considering interest has continued to accrue since the payments were halted, the repayments will be even larger than they were before the pandemic began.
One would hope that the banks and other lenders understand the unprecedented nature of this pandemic, and throw a life raft to Australians. But the fact remains that the banks are fully in their rights to declare a default on a borrower’s credit file after an account is sixty days overdue.
Once a default has been recorded on a credit file it remains there for five years, regardless of whether it’s paid or not. A default makes finding finance incredibly difficult. Credit files are Banks first determinant for a successful application. The initial application process is fully automated, meaning a computer checks the credit file and a default often leads to an automatic decline.
As Banks tighten their credit policies, maintaining a good credit rating is imperative to your future financing needs. For many, struggling with debts will be inevitable given the current economic situation, but the key is making sure you’re doing all you can for the best chance of recovery.
The key to protecting your credit file is communication. This may be difficult at first, but it is very important that you be transparent with the banks about the situation you are in.
The reason communication is so important is because the credit file is managed separately and is once again automated. An account that is overdue will automatically go onto a mail list where demand letters will be sent out, and should you fail to communicate with the lender you will automatically be listed as a default. Once a default is recorded, it is near impossible to have it removed. So, act proactively, knowing you may not be able to meet your payments, act before you receive a demand letter.
I recommend you do this because, when a borrower contacts a credit provider about an account they are having trouble with, they will typically end up talking with someone from the financial hardship department who will work with the borrower to help the borrower get back on track with their payments. While the borrower continues to communicate with the creditor, and they are working towards the resolution of the problem account, it is very unlikely a default will be listed.
Over the next few months if you find that your business is slowing down, or your employers have indicated to you that they may have to cut staff, please be proactive and call the credit provider early. This will protect your credit file as you go through the process of finding a solution.
At Finance Mutual Australia, we pride ourselves on our expertise and our human touch. We understand this is a difficult time and are always willing to help you deal with you lender, or find you a new lender if need be. For professional help contact us today.
Be strong, be proactive and you will get through this.