Is your debt starting to bite? If you've lost your job, your business, or even some of your income, making those regular debt repayments may be impossible.
Unforeseen disasters such as a pandemic can leave you stunned, but you need to take action or your situation will just get worse. If you miss a payment you'll damage your credit score, unless you've contacted your lender first.
Lenders are required under the Credit Contracts and Consumer Finance Act (CCCFA) to consider applications for hardship. But they need to know that you're in trouble to do so.
They can reduce payments by extending the loan period, restructuring your loan, or under lockdown banks can offer loan and mortgage deferrals (holidays).
Finance companies, building societies and credit unions weren't included in the Government's loan deferral package. Some, however, such as Avanti Finance and First Credit Union have found ways to offer the holidays.
Beware the holiday isn't a get out of jail free card. "The debt is not being waived in that 'holiday' period," says Lyn McMorran, executive director of the Financial Services Federation. "[The balance] is still there and interest is being calculated on it daily so that effectively the borrower will end up with a larger debt at the end of the holiday period which might leave them in a worse situation than when they started." That's the same whether it's a bank or finance company.
Financial providers are stepping up in many ways. Some banks, for example, are offering temporary overdrafts; often up to $5000 for home loan customers and up to $1000 for others. Your bank may allow you, if you're in hardship, to break term investments without the usual penalties. Or they may waive lending fees to tide you over Covid-19.
It's not just private borrowers. Many small-business owners are in the proverbial, and often have their own homes on the line for business debt. Small businesses are being thrown some lifelines. The Companies Act has been amended so that directors can hibernate debts until they are able to start trading normally again, providing 50 per cent of creditors agree.
The Inland Revenue Department (IRD) is doing its bit for Kiwis struggling with tax and student loan repayments. The taxman can now waive use of money interest charges, and businesses will be able to carry back losses. New tax debt incurred as a result of lockdown can be partially written off due to serious hardship. Those with pre-existing debt can ask to renegotiate it.
While you can do most of the steps above online, it's a good idea to pick up the phone and call to find out what's on offer. McMorran says her members are endeavouring to treat customers with empathy and doing what they can to assist.
Also ask if you have insurance to cover your debt repayments. You may have taken it out without realising.
While you are at it call you energy telecommunications and internet suppliers. They may be able to pause disconnections, or waive additional interest charges.
If you're feeling overwhelmed telephone your local budget advice centre, or MoneyTalks on 0800 345 123. Trained money mentors there can lend an ear, help you make sense of your situation and assist you to create a plan.
This is not a time to be proud. If you need to apply for Covid-19 wage support packages from the Government do so sooner rather than later. For more details, check out the Financial Support section at the Government's Covid19.govt.nz website.
Whatever your situation you may be able to withdraw some of your KiwiSaver. But don't expect it to be a given or to be quick. Sorted.org.nz has a good summary of KiwiSaver issues, which you can find at Tinyurl.com/CovidKiwiSaver.
The Covid-19 cloud has had silver linings for some people and if you still have your income you have probably found yourself spending less on petrol, lunches, takeaways, Friday night drinks and so on.
If that's you, this is the time to start making a serious dent in your debt by upping repayments.
If you're in the lucky position of being debt free, but don't have an emergency fund, start today in putting a regular sum away to create one. Next time it could be your income on the line.