Have you ever been tempted to apply for an online high-cost loan?
If not – that’s great. But if you have seriously considered it, please, please stay away!
The number of people we see who have been caught up with one of these lenders, and the stress and anxiety it causes, is unreal.
It’s so easy to apply online.
I’m not going to name them as I don’t want to advertise them.
Let’s just call them what they are: sharks or predatory lenders.
When people are desperate they do desperate things – and borrowing money from these guys is easy and straightforward.
Before you know it you have $500, $1000 in your account.
The problem is when people are desperate they don’t think about the consequences. This is mainly the payback price and the horrendous amount of interest.
We have sharks out there that charge more than 500% interest – that’s just not right.
Contracts Legislation Amendment Bill has just gone through Parliament to limit the amount of interest that can be charged. The proposed limit is 0.8% per day or 292% annually. This is still incredibly high.
Minister for Commerce and Consumer Affairs Kris Faafoi said this would take effect in stages from March 2020.
We have had clients who have used these sharks to pay for an everyday account – car repairs, electricity or even food – and found their $200 loan ended up at $1300.
Yes, they didn’t pay what they should have and, yes, interest and penalty charges accumulated, but $200 to $1300 is still disgusting!
Fortunately some lenders out there don’t prey on the vulnerable and work with us to help people to make better financial decisions.
We are fortunate in North Otago to now have options for people to get loans that are not going to cost them a fortune.
In some cases, these are interest-free loans. There are conditions to them, but they are realistic.
One organisation that has recently been brought into Otago is Good Shepherd NZ, which provides 0% and step-up loans.
These are funded by BNZ and are supported by the Government.
Presbyterian Support Otago has also employed community finance officers around Otago. We have been fortunate to get Bruce Smith next door to us here in Community House. It gives more options for our clients to make choices that are right for them.
For more information on these loans you can visit website stepuploan.org.nz and get the contact details or call in and see us. We can point you in the right direction.
- Katrina Kelly is a financial mentor for Family Works and the North Otago Budget Advisory Service co-ordinator.