Families urged: Spend wisely this Christmas

Avoid borrowing money at extortionate rates, shoppers warned

‘It can spiral out of control’

THE f i nancial strain of Christmas means the average family will not recover until March, a survey shows.

And for some, the cost of Christmas will be felt past September 2016.

A survey of a 1,000 adults, carried out on behalf of the Irish League of Credit Unions, shows that women take longer to recover from overspending at Christmas with the average female requiring nine weeks before she sees her personal finances get back to normal.

The average male consumer requires seven-and-a-half-weeks.

While 31% of consumers will not require any recovery time, 24% will require just one month for their finances to recover.

This Christmas the average person will spend €563, and almost half will have to borrow to make ends meet.

The average amount borrowed is €388 but worryingly almost one in ten cash-strapped parents will be forced to approach a moneylender with a further 4% saying they are considering it.

Women are more likely to borrow than men but when they do borrow, men take out bigger loans – €408 versus €364.

Ed Farrell of the Irish League of Credit Unions is reminding the public that Christmas is about giving but not robbing the family finances.

He is advising consumers to set a Christmas spending budget and make a list to help control shopping costs.

Mr Farrell said it was worrying to see that some are considering using a moneylender. ‘If you feel that you need to borrow, speak to your local credit union first.

‘Using a moneylender can result in consumers getting trapped in a cycle of debt which can be hugely difficult to break free of.’

Personal finance expert Frank Conway said many consumers did not realise that by going to a moneylender they might end up paying back more than they ever thought due to compound interest.

‘In many cases the compounding impact of the interest is over 100% of the original loan amount so that smart phone you are buying is not €300, it’s €600,’ said Mr Conway.

He added: ‘While a credit card will charge 18%, a moneylender will charge 118%.’

Mr Conway said this can become a real problem for borrowers who don’t pay off their full interest and loan amount quickly as the unpaid interest is ‘rolled over’ and added to the amount originally l ent, resulting in repayments growing each month.

‘In the old days the moneylenders got heavy physically, today it affects your credit score,’ said Mr Conway. ‘The one thing I would say about credit unions is that they are not for profit, you have a far cheaper cost of borrowing and you can get in to a savings habit earlier on.’

Jim Walsh from the St Vincent de Paul said his organisation saw a rise in the problems caused by moneylenders every year in the weeks after Christmas. ‘This tends to be the time of the year that people need some extra money and getting it from a moneylender is an easy way to do it unfortunately.

‘The problem is that people have to pay extortionate rates of interest and end up getting i nto trouble.’

According to Mr Walsh it’s not unusual for people to take out a second or even a third loan with the same moneylender to pay off the first loan they owe. ‘When people get in to that spiral it’s very difficult to get out,’ he said.

Despite the stereotype, most moneylenders do not call round door-to-door or use intimidation to ensure payment, said Mr Walsh. Instead, he said, the legal ones mostly operated online through seemingly reputable company names and websites.

This Christmas, volunteers from the St Vincent de Paul will visit 140,000 households. Mr Walsh said calls to the society’s helplines remained stubbornly high.

‘In the east region alone we will end up having 65,000 calls for help. These are not increasing the way they did year-on-year but they are still 100% higher than before the recession,’ he said.

The survey also found that fewer than one in three adults feel positive about their financial situation ahead of Christmas but men have more confidence than women.