We often find that people prefer to borrow money off their relatives or friends than to offer a Debt Agreement .
This often burdens relatives unnecessarily and quite often makes no difference overall to their debt position.
The payments you need to pay back a loan to a relative, will nearly always be higher than a Debt Agreement, where the interest is frozen and payment plan worked out to your budget. Most people expect their loan to be paid back in a lump sum, when all of a sudden they need their money back. But that is never going to happen if you are in financial trouble. That is of course, if it ever gets paid back at all and doesn't leave everyone feeling upset.
A loan from relatives and friends does nothing to address bad borrowing behaviour. With credit once again available, debts once again rise, there is no mechanism in place to prevent the Debtor from just borrowing more money again, as they have always done. People enjoy the lifestyle they have on borrowed money and it takes a bit of a shock and an unavailability of funds to change most people's behaviour.
Many a parent or friend have found themselves in serious financial problems when promised loans to friends or children are not paid back. And what seems to make it worse is that their children or friend seems not to care and thinks they are entitled to take as long as they want, or to never pay it back at all. We then often have to do debt agreements for people left in this precise position, who have had an excellent credit rating all their life and have simply helped out their friends or relatives.
Be careful you never lend money you are relying on or can't do without. Most times it will not be paid back, simply because the person can't. If you are borrowing money off a friend or relative please do not assume they do not need the money back.
When a person does a Debt agreement, it protects that persons assets, gets hassling creditors off their back and teaches people that it is possible to live within their budget and not have to borrow money. A friend or relative lending them money, generally does not.
Most people who see through a Debt Agreement, will automatically have a clean start to their credit report, 5 years after they start it anyway. The Debt Agreement enables their credit history to be reset at the 5 year mark. It stops further defaults appearing on their credit report from existing debts, as long as the Debt Agreement Payments are honoured.
When a person is in Financial Trouble, a Debt Agreement is not a punishment. It protects their assets, protects their wages from garnishees, cleans their credit rating over a 5 year time frame and teaches budgeting.
Done correctly, it generally puts a person in a much better financial position within the 5 years and teaches life lessons on handling money and debt. Sometimes they just need 5 more years to grow up.
What prevents people deciding on a Debt Agreement when they need to do it, is more of a matter of hurt pride or ignorance of what is involved. Most people will not break the debt cycle without addressing their situation. Borrowing money off friends and relatives only prolongs the pain and stress of their situation by avoiding the core root of the problem. Many of the people who lend them money will end up with the same problem themselves, if it isn't paid back.
Bad situations happen to good people. It doesn't necessarily have a reason. That's why there is Government Legislation like this, to protect you when you find yourself in a bad situation. It helps you get back on your feet quicker. It helps you get back to contributing to the economy and the community. It benefits everybody in the long run.