Borrowing will be harder
When New Zealanders get out of lockdown and many of them hit the shops, they may be very surprised if they try to borrow money or buy something with an interest free retailer loan. Borrowers will need to provide much more information, which may be a shock to the system for many people.
On December 1, 2021 the Credit Contracts Legislation Amendment Act 2019 comes into force and it means all lenders must determine if the borrower can afford the loan and if it is suitable for them. This amendment to Credit Contracts and Consumer Finance Act 2003 includes everything from car loans to those 60-month interest free loans at leading retailers, and high interest pay-day lenders.
Increasing lenders’ responsibilities may save us from ourselves, that is, our enthusiasm to buy bigger televisions or cars we can’t afford and New Zealand could turn back the clock 50 years to a culture of making do.
That’s going to hurt.
Let’s not forget plenty of Kiwi borrowers take high interest loans to cover basic living expenses when life deals them an unexpected blow. The law change means lenders should decline a loan to those on struggle street because they are unlikely to be able to afford repayments.
Will the amendment to Credit Contracts and Consumer Finance Act 2003 reduce debt?
Borrowers will have to provide a lot more information to get a loan with no more instant credit from retailers. It’s likely borrowers have to produce three months’ bank statements to borrow any money, which they have not done before.
When applying for a loan be prepared that you will have to provide information about all your debts, living expenses, income, and credit history.
In theory, the amendment to the act should reduce the number of New Zealanders who live with the burden of problem debt but that could just be wishful thinking. If loan applications are not approved, it could be a good outcome that could reduce unaffordable consumerism.
The best strategy is to avoid getting into debt, but the Debtfix Crew recognises living with debt is a normal and acceptable part of life in New Zealand. We all borrow sometimes, which could be as straightforward as using a credit card, buying a new smartphone with a pay monthly plan or a student loan.
It makes sense to reduce debt as much as possible and if the amendments to credit contract law mean New Zealanders cut back on borrowing and increase debt repayments that will help.
Your debt will affect your ability to borrow more
There is seldom a clear-cut answer to questions about debt and the impact it has on New Zealanders, but in general the advice is:
Avoid debt, especially for non-essential items
Repay the most expensive debts first
Read credit contracts and if you don’t understand something ask the lender for clarification
Responsibly limit your borrowing
Get independent advice
There is always a solution
Debtfix welcomes the amendments to credit contracts and applauds responsible lenders who do their bit to keep more New Zealanders financially afloat.
Contact our Crew now to get your debt sorted.
