There is a growing trend among Generation X and Y individuals in Australia – the use of credit far exceeds levels of income for the country’s youngest borrowers. With a shifting focus on using plastic instead of cash for purchases, coupled with a lacking degree of understanding as to how credit works and what it ultimately costs, twenty-somethings are struggling to keep up with their financial obligations and need help with debt.

According to a recent study conducted by RateCity, the average age to obtain a credit card for the first time is 20, as opposed to older generations where the average age was 34. Not surprisingly, the study also found that nearly 42% of young Australians (those under the age of 24) carry between $10,000 and $30,000 of personal debt which does not take into account a mortgage. As alarming as the amount of debt young Australians carry is the rate at which they are borrowing. The study also mentions that the same group of young borrowers is four times more likely to get cash through an advance on their credit cards than borrowers in older age groups. With such staggering statistics, it is clear that young Australians need help with debt in order to stay afloat with their finances.

Growing in popularity among the debt-ridden younger population is the option of a debt agreement. As offered through the Bankruptcy Act, debt agreements are contracts developed between the borrower and his or her creditors that detail a fixed repayment plan, typically with frozen interest rates and consistent payments from the borrower. The creditor is encouraged to accept payment of debt based on what the debtor can afford to pay each month, and take into consideration the borrower’s other financial obligation in relation to total income. As debt balances steadily increase among Generations X and Y, more borrowers are opting to negotiate with creditors through debt agreements in order to stay out of bankruptcy. Usually, young Australians who need help with debt are better off working with professionals who specialize in successful debt agreements than doing it alone.

Although entering into a debt agreement with creditors can steer a borrower clear of filing for bankruptcy, there are still credit consequences that can hinder future borrowing potential that individuals should be aware of. Entering into a debt agreement with a creditor will be reflected on a borrower’s credit file, through the National Personal Insolvency Index, and is listed for creditors and new lenders to view indefinitely. For this reason, even though it is superior to filing for bankruptcy, debt agreements should be used as a last resort for those debtors who are truly unable to payback their debt obligations and desperately need help with debt.