Budgeting Services and organisations like Nga Tangata Microfinance support people to escape the debt trap. The Salvation Army’s 2015 State of the Nation Report showed that average household consumer and credit card debt rose by almost 5% in 2014, to $12,200. One of the important ways for families to get ahead financially is become “debt smart” and getting out of high interest debt faster is one of the key steps.
A single high interest debt might seem harmless but the interest rates and excessive charges of third tier and pay day lenders can quickly ensnare families into a cycle of unmanageable debt that limits food for the children and other family essentials.
Budgeting Services provide a tremendous support to their clients who are under the burden of high interest debt; providing a budget plan, negotiating with creditors where possible and advising ways that limited income can be stretched.
Escape from Loan Sharks
Robert Choy, Executive Officer of Nga Tangata Microfinance Trust, says “Budgeting Advisers now have another tool in their toolbox”. In partnership with Kiwibank and the New Zealand Federation of Family Budgeting Services, NTMF is expanding nationwide its provision of no interest loans to qualifying low income families. These loans are safe, fair and affordable, in stark contrast to loans offered by high interest lenders.
The third tier lenders were charging in excess of 40% interest…
Robert gives the example of a couple with a low level of English proficiency and a lack of understanding of legal contracts who had taken several high interest loans, and also had a very high electricity debt. Their high debt servicing costs resulted in very little left for food.
Their Budgeting Adviser negotiated with the electricity company to put a payment plan in place.
“The third tier lenders were charging in excess of 40% interest. Nga Tangata Micro finance’s loan for $2,498 meant that three of the couple’s debts could be paid off and replaced with a smaller no interest repayment over two years. This meant more money for food each week. And the Budgeting Adviser has worked with the couple to ensure they avoid taking on any more high interest loans and they are now nearing successful repayment,” says Robert.
NZCCSS is proud to be one of the founding supporters of Ngatangata Microfinance. Find out more about their work on their website: www.ngatangatamicrofinance.org.nz