How Aussie mum turned $80k personal debt into $2m business as many call debt line for help
The number of Aussies seeking financial help has skyrocketed. See how an Aussie mum and others have wiped their mountains of debt and experts’ tips to succeed.
National
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The number of desperate Aussies seeking financial help jumped almost 30 per cent in the first four months of 2023, with mortgage and credit card repayments the biggest challenges.
Most calls to the National Debt Helpline (NDH) came from NSW and Victorian residents, with experts revealing most of those in financial trouble were “working poor – those from two-income families” crippled by cost of living pressures.
The NDH received 45,291 calls in the first four months of 2023, up 29 per cent on the same period last year.
NSW residents made the most calls at 11,310, up from 8767. But Victorian demand for the service was up 48 per cent – the steepest increase in the country – from 7048 to 10,451 calls.
There were 9335 calls to NDH from struggling Queenslanders, up 22 per cent, and 5127 calls from South Australians, an increase of 13 per cent.
Calls from the ACT were up 44 per cent, the NT was up 21 per cent and demand jumped 16 per cent in Tasmania and 30 per cent in WA.
The service also reported a 27 per cent increase in visits to its website, with higher traffic on its bankruptcy, debt problems and debt solutions pages.
Lody Stewart, a financial counsellor with Financial Counselling Australia, said while the level of debt was hard to quantify, there had been an increase in people struggling making ends meet, with many calling the NDH for the first time.
“They’re the working poor, possibly a two-income family. Any more increases in cost of living and they’re not going to be able to pay their bills on time,” she said.
“We’re getting calls from people who are worried about further interest rate rises and their mortgages going up.”
She said banks’ hardship policies could help ease the pressure for those struggling with their credit card, personal loans or mortgage but there were fewer options to help cover strata or council rate debts, which were “just as important”.
“Strata organisations are very quick to move to debt collectors and court to pay it off – that can put you at risk of being forced into bankruptcy,” Ms Stewart said.
People daunted by seeking help are turning to services to advocate on their behalf with banks and debt collectors. One Australian company claims to have wiped $15 million in debts in recent years.
Debt Angel Solutions reports it helped almost 1000 Aussies get back on track by negotiating a better deal with their debts. That can mean freezing their loans for a portion of time, lowering interest or fees charged, and in some cases even reducing the principal debt.
Kitty Thomas, who started the company after the lessons she learned paying down her own $150,000 personal debt, said most people came to her feeling trapped and ashamed, often owing tens of thousands of dollars.
Ms Thomas said she had noticed an increase in people being stung by short-term solutions, such as payday loans and buy now, pay later schemes.
“There are all of these people going from payday loan to payday loan that are literally drowning. They may only be low amounts of loans but the interest is so high – it’s a nasty cycle,” she said.
Debt Angel Solutions says it is a fee for service company doing their best to help people. However Kitty won’t take on a client unless she can help them save more than the service cost them.
Sydney single mother Jen Harwood turned to Debt Angel after feeling “disabled and crippled” by the $80,000 worth of credit card debt she amassed from leaving her ex-partner.
Ms Harwood turned to credit cards to help cover the bond and rent on a home, as well as buy necessary furniture and groceries.
With a limited ability to work, the debt kept mounting over two and a half years.
“I’d give my daughter food and I’d eat cereal or rice. I couldn’t talk to anyone about it because I was feeling so bad. It was a series of choices of survival, not indulgence,” she said.
She said Debt Angel gave her breathing space by pausing her debts, allowing her to found a business – Happy Hair Brush – which turned over almost $2 million last year.
“When you are in survival mode and staving off the (debt) wolves, you can’t create anything because you’re just trying to survive,” she said.
Ms Harwood said she had since changed her spending habits and no longer had a credit card.
“Spending money on a credit card that you have no means to repay is eroding your power,” she said.
“I’m looking forward to the day when I can buy a house for myself.”
‘SCARED, HEARTBROKEN’: HOW DEBTS NEARLY COST AUSSIE FAMILY THEIR HOME
Melbourne couple Judy and Luke were on the verge of losing their home and were drowning in close to $50,000 of credit card and personal loan debts.
Judy said the debts started piling up after she was unexpectedly made redundant and took almost half a year to find a new job. It was further compounded by some other expenses, including their small wedding and a self-funded trip for Luke to represent Australia at the Dragonboat World Championships in Hungary.
Their finances took a further knock when Luke tore his ACL and was on WorkCover for more than a year, and Judy fell pregnant with her first child.
They couple felt “scared and heartbroken” at the prospect of having to sell their family home.
“We had worked so hard to own our first home and to lose it over about $50,000 debt across a few credit cards and a personal loan felt unbelievable. We had a little baby and had no idea what we would do or where we would go,” Judy said.
“The shame was crippling and we had to borrow money from friends on occasions which was incredibly embarrassing.”
She said after a horrible experience with a mortgage broker, who made them feel “so ashamed like we were criminals”, they turned to Debt Angel, who helped take some of the pressure off the situation.
“Our debt put the kind of mental and emotional stress on us that has stayed with us far longer than the resolution of the debt. In fact I still get triggered when things don’t go to plan in our world. I think people grossly underestimate the psychological impacts debt and finances have on people and relationships. It’s suffocating, scary and can make you feel a sense of hopelessness,” she said.
“Kitty managed to negotiate for our debts to be reduced to approximately 50 per cent. This meant we could refinance our house and with the extra equity pay off our debts. This meant we could keep our house and breathe again. And we got rid of all our credit cards.”
Not only were Judy and Luke able to keep their family home but they were also able to have a second child, something they had not thought possible with their debts.
‘PAYING OFF $50K DEBT WAS CRUCIFYING ME’
Brisbane single mother of three and nurse Amy, who did not want her surname revealed, found herself in a similar position to Ms Harwood after leaving her ex-partner, owing almost $50,000 on credit cards.
She said after the separation she turned to credit cards to help pay for living expenses, as well as some nights out with friends to help her “survive” being “in a really dark spot”.
“I got myself into a situation I’d never thought I would be in. Everyone is a few mistakes or a few decisions away from bankruptcy and spiralling,” she said.
“I did what I needed to do, but I needed help. I was lucky that I managed to keep paying off the loans but it was crucifying me. I was picking up overtime. The lack of sleep and mental load – my body couldn’t go through anymore.”
Amy said Debt Angel helped her to see where her money was going and have open conversations about her finances. They also helped to reduce her debt to $30,000.
She said knowing her budget has helped her prioritise expenses and be better informed about her spending choices. She has recently paid off that debt and saved up to take her children on a holiday to “make memories”.
MANAGING DEBT TIPS
1. Being ashamed or embarrassed is futile. The only person that hurts is you. Ask for help.
2. Know your numbers. Understand what you have coming in and out, and what debts are really costing you.
3. Stay away from buy now, pay later loans. They’re a temporary solution that create a far nastier problem.
Source: Debt Angel Solutions
National Debt Helpline on 1800 007 007
Lifeline Australia 13 11 14
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