Few things are harder than admitting you're struggling with debt, but help is at hand.
Few things are harder than admitting you're struggling with debt, but help is at hand. Warwick Daily News

Are you drowning in debt? Help is available

FEW things are harder than admitting you're struggling with debt, but help is at hand.

I recently attended the launch of the National Debt Helpline, a service funded by federal and state governments, which has the potential to turn around the fortunes of Australians weighed down by runaway debt.

We are collectively carrying more debt than ever before - at a time when wages growth is the slowest in decades. It's not a great combination.

On top of this, interest rates are at historic lows but it's unlikely they'll stay that way forever. If rates start to climb, it's a fair bet a growing number of households will feel the financial pinch.

To be fair, our home loans represent a significant chunk of household debt. If you can manage your loan repayments, this type of debt is not a problem as a well-located home will rise in value over time, and at some stage you'll own the place debt-free.

The type of debt that tends to land people in financial hot water is 'have it now' debt. I'm talking about credit cards, store debt and payday loans that let us buy more stuff we often don't need, and which certainly doesn't rise in value.

Australians owe a total of $35 billion on their credit cards. And while we are using debit cards a lot more these days, the purchases made on credit cards tend to be big ticket items.

The average credit card purchase is $120 compared to just $50 for debit card buys. So, it only takes a handful of big purchases to rack up a four-figure card balance.

Now, you could say that compared to the balance of our home loans, the average card debt of $3,100 isn't worth worrying about.

The trouble is, surprisingly few people have just one credit card. It turns out close to one in five cardholders have three or more cards.

That could mean facing a debt of $10,000 or more at interest of around 18% (by the way, the highest card rate on the market is a whopping 24.5%). Looked at in this light it's easy to see how disastrous this sort of debt can be.

If you feel debt is getting the better of you, it's worth giving the National Debt Hotline a call on 1800 007 007 (James Bond fans will have no trouble remembering the number!).

Not only is this a free service, you won't be sold additional loans as a way of paying off your current debts, or be steered towards complex debt arrangements that can seriously tarnish your credit record.

Admitting you're sinking in debt is never easy but it's better to take positive action today than allow it to overwhelm you.

- Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

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