Avoiding crippling debt at Christmas

  • 27/11/2017
Christmas is an expensive time of year and an unexpected bill can throw people into debt.
Christmas is an expensive time of year and an unexpected bill can throw people into debt. Photo credit: Getty

There are just four weeks to go until the jolly bearded man arrives and for many the pressure will be mounting. Can you afford your kid's extensive wish list or your partner's expensive gift hints?

Panic buying makes it easy to blow the budget but even the most prepared can find themselves overextended if an injured moggie, an aching tooth or a clapped out car is added to the mix. Some research shows it can take upto nine months to recover from Christmas debt.

For Abi Woods, a big mechanic’s bill was the last straw. She was fresh out of school, away from home, and her car kept breaking down. "It was a lemon," she says. "It was so rubbish, one day my battery died in the middle of an intersection."

Her bank wouldn’t lend her any money for its repair - but a finance company gladly handed over $5,000. "I had to prove that I was employed but other than that, zero hoops," Abi says. "They didn't even ask me if I understood the terms. So when they said to me it was 29.99 percent  interest per annum I was like 'Sure! Whatever that means!'" A year later, she'd paid a whopping $2,000 in interest, and only $1,000 off the principle of her loan.

Tom Hartmann, from the Commission for Financial Capability (CFFC), says New Zealanders accept debt as part of life.  Kiwis spent $36 billion on their credit cards last year, and research agency Canster found 63 percent of that incurred interest.

Tom’s tips for those that have to borrow:

  • Try not to borrow from family and friends. It can come between you
  • Look for low or no interest options
  • Pay it off as quickly as you can
  • Be wary of 'payday lenders' who offer short term loans with very high interest rates. His research showed annualised interest rates can reach 560 percent

Shaun Quincey is trying to help people out of the cycle of debt, through his zero fees, interest-free payment scheme, Genoapay. "We make $16 billion worth of interest repayments each year and that doesn’t have to happen," he says. "We want to put that interest back into families' pockets."

210 retailers - dentists, vets, beauty salons and mechanics - have signed up so far.  Customers undergo a credit check, then pay the purchase price to Genoapay in 10 weekly instalments.  Genoapay pays the retailer immediately - taking a fee of around five percent.

Mr Quincey chooses to follow the Responsible Lending Code. "We don’t want to provide to people who can't service payment plans - we think it's pretty important they can," he says.  

Tom Hartmann says for those still stuck in debt, there's free personalised help available for via the country's budgeting helpline 0508 BUDGET.

"Work with someone who can really understand your situation and show you a way out. Someone in your corner who can help you negotiate with lenders on your behalf and show you a way out."

This article was created by Newshub for Genoapay.