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Short-term loans ‘not the answer’ BY SUE NEWMAN
SUE.N@THEGUARDIAN.CO.NZ
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Short-term, high-interest loans are not the answer to digging your way out of debt, a budget advice expert says. As Christmas and the cost of equipping children for the new school year starts to bite, Ashburton’s Budget Advice service manager Jeanette Molloy said her team were gearing up for a busy period. Over the past year, she said they had noticed a trend where clients were presenting with a range of complicated factors in their lives that were impacting on their finances. “The clients we’re seeing are far more complex than in the past; there are now so many other issues involved and that means the role of our advisors is changing too,” she said. One of the contributors to budget
problems were the loan companies who offered high-interest, short-term loans, Molloy said. “We’re seeing people with these loans who have no idea how much interest they’re paying. “It’s in the paperwork but they don’t want to see it, they just see the money as a short-term fix to their problem, but so often those loans get out of control very quickly.” The key for anyone who was struggling financially was to recognise the problem early on and to seek help while the problem was still relatively small, she said. “Unfortunately we have become the ambulance at the bottom, the people that people come to when their power is cut off, but the trick is to seek advice and be proactive before things get really complicated.”
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Out-of-control power bills were often the catalyst for a person seeking help from the service. While this usually happened towards the end of winter, the service was currently seeing a number of clients whose power had been cut off in January. In terms of planning, there was no such thing as a normal client load, rather work seemed to come in surges, she said. Last year the work load was varied with the Government putting in place more assistance for people on benefits, however, beneficiaries did not make up the bulk of the service’s clients, Molloy said. With the help of an advisor, it might take time and some hard work, but most people were able to climb their way out of debt, she said.
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