Take debt action before crunch
No-document loans and credit card debt are the financial traps of choice in Sydney’s western suburbs according to Graham Terry, a Budget Counsellor with ANGLICARE.
Mr Terry says he has seen an upswing in people who have been overwhelmed by repayments on a range of loans from a lot of different places. He said it is also becoming harder to find ways of consolidating these loans through the banks.
Mr Terry, who had a career with the Australian Tax Office before working with ANGLICARE, said the trend of the last decade to buy now and pay later leaves a lot of people on moderate incomes vulnerable, to the unexpected.
“Recent interest rate rises hit small loans just as much as they affect mortgages.
“Occasionally someone comes along who is in financial difficulty and it turns out they have a boat in the backyard – but that is rare,” he says.
“Moreoften, disaster happens: people took on their expensive loans when times were good only to be hit by retrenchment or a funeral.
“Some people have tried to pitch in to help a family member but didn’t have the means.” The worst part of his job, according to Mr Terry, is helping clients fill in the forms for bankruptcy.
Mr Terry says people need to become savers and not just borrowers. He says in the 1970s there was a Government Home Savings scheme where you earned a rebate for every dollar saved toward a deposit for a home, similar to Kevin Rudd’s Home Savings Scheme which will reward savers. This was a good incentive.
Tips to avoid the debt trap
• Make out a budget of your Income and Expenses and live within your means (budget). Include a list of your Assets and Liabilities to give you the complete picture of your financial position.
• Try to consolidate multiple loans sooner rather than later while you have a reliable income stream.
• Try to negotiate more manageable repayments with lenders or ask for an extension before it is too late.
• Before taking a loan, ask the lender to explain to you what the total cost will be over the full length of the loan, so you can decide whether the item you are borrowing for is worth that amount. For example, a washing machine priced at $1,000 with repayments of $31 per week for 12 months, will cost you $1,612; at $25 per week for 12 months will cost you $1,300.
• Look for items that advertise an interest free period (often 3-6 months) and work very hard to pay for them within that period. It will save you money because you only pay for the actual cost of the item and give you a positive credit rating at the same time.
• Avoid items that advertise “No Repayments until 20..”: you don’t know what your situation will be in the future so you may be committing yourself to more than you will be able afford.
ANGLICARE runs courses on budgeting. Mr Terry is also available for budget counselling and appointments can be made by phoning Anglicare on 9832 2300.
Media contact: Leonie Savage on 0411 779 337
