Get on top of your debt or get help
Is your debt starting to bite? If you’ve lost your job, your business, or even some of your income, making those regular debt repayments may be impossible.
Unforeseen disasters such as a pandemic can leave you stunned, but you need to take action or your situation will just get worse. If you miss a payment you’ll damage your credit score, unless you’ve contacted your lender first.
Lenders are required under the Credit Contracts and Consumer Finance Act (CCCFA) to consider applications for hardship. But they need to know that you’re in trouble to do so.
They can reduce payments by extending the loan period, restructuring your loan, or, under lockdown, banks can offer loan and mortgage deferrals (holidays).
Finance companies, building societies and credit unions weren’t included in the Government’s loan deferral package. Some, however, such as Avanti Finance and First Credit Union have found ways to offer the holidays.
Beware the holiday isn’t a get out of jail free card. “The debt is not being waived in that ‘holiday’ period,” says Lyn McMorran, executive director of the Financial Services Federation. ”[The balance] is still there and interest is being calculated on it daily, so that effectively the borrower will end up with a larger debt at the end of the holiday period which might leave them in a worse situation than when they started.” That’s the same whether it’s a bank or finance company.
Financial providers are stepping up in many ways. Some banks, for example, are offering temporary overdrafts; often up to $5000 for home loan customers and up to $1000 for others. Your bank may allow you, if you’re in hardship, to break term investments without the usual penalties. Or they may waive lending fees to tide you over Covid19.
It’s not just private borrowers.
Many small-business owners are in the proverbial, and often have their own homes on the line for business debt. Small businesses are being thrown some lifelines. The Companies Act has been amended so that directors can hibernate debts until they are able to start trading normally again, providing 50 per cent of creditors agree.
The Inland Revenue Department (IRD) is doing its bit for Kiwis