PEOPLE with debts piling up after Christmas should seek help before situations worsen, says the Families Commission.
A study by the commission shows that families who seek help for their financial problems early are far more likely to get back control of their debt.
The study, Escaping the Debt Trap – Experiences of NZ Families Accessing Budgeting Services, was developed by the Federation of Family Budgeting Services and the Salvation Army.
The research shows that budgeting services make a real difference, and empower families with the confidence and skills they need to overcome debt problems.
Families Commissioner Gregory Fortuin says that asking for help can alleviate months, even years, of hardship.
“Budgeting services give support, advice, information and, in some cases, even help sort out realistic repayment schedules with creditors,” he says.
One participant told researchers: “I thought budget advisers were just to sort your finances, just to help you budget your money.
“I didn’t know that they had the power to sort out my finances with the finance company.
“If only I knew I could have done it a long time ago.”
Mr Fortuin says: “It’s best to get help early. This might be when a major life event occurs, such as diagnosis with a chronic illness, disability, losing a job, having a baby or separation.
“Or it might be when you first become aware that your expenses are getting out of hand.
“Many families will be feeling the pinch now their credit card bills are coming in after Christmas.
“Families sometimes feel they have little power over their finances. When debt piles up, this sense of powerlessness deepens.
“If you’re worried, seek help. Budgeting services help you get back on top of things.”
The study also reveals that families are often unaware of the high interest they’ll have to pay when taking out debt through creditors, such as finance companies, or hire purchase. Nor do they always make the link that a high interest rate means a loan will cost them more.
“The situation can be worse for low-income families,” explains Mr Fortuin.
“Often no one else will loan to low-income families, so the lenders are able to charge high rates – not just because their risks are higher, but because they also have less competition.
“If you think you have to purchase something on credit, make sure you shop around for the best interest rate, and read the fine print on the contract to check for other charges or penalties.
“You wouldn’t buy a car or television without looking for the best deal, so why take on debt without looking for the best deal.”
