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The Low Down on Loans

Downtown Community Ministry


The Low Down on Loans

The importance of Downtown Community Ministry’s Street People Project has again showed its crucial role assisting those out of financial difficulty.

Two clients recently made contact with Newtown based loan companies, a practice strongly discouraged by SPP co ordinator Jen Long, and what their experience gave us reason to investigate further.

The loans sought by our clients were small and were likely needed to service other personal debts, but our research revealed the costs associated with these loans can almost double the amount initially required.

For example: a loan of $500 repaid over one year at both companies in question increased to nearly $800 once establishment fees, insurance, administration costs and interest of up to 28% was included. Of concern was the fact that while our clients were informed of the interest rate for the loan, it was only after DCM made phone enquiries that the other fees were made known.

The influence of loan companies is cited in the recently released Living Standards report by the Ministry of Social Development. It notes that low income earners are more likely to carry a high level of personal debt and much of this is through small finance companies.

Sadly DCM is not surprised that many of these businesses are grouped next to Work and Income New Zealand offices, pokie bars and Cash Converters in Porirua, Lower Hutt and Newtown.

As a benefit advisory and budgeting service, SPP has over 60 clients that have their benefit redirected through the programme to help manage expenses such as rent and power. Debt repayment is given a high priority in order to place the client back on an independent footing as soon as possible.

ENDS

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