Unlike a game situation, he can wait all day until his pitch – his opportunity – comes in. The trick is to be prepared when it does.
Unfortunately, there are times we're under pressure, especially when it comes to borrowing. Money gets short, which puts us in a tight spot. How many days until payday? We might even be counting the hours!
Payday lenders are not exactly famous for mates' rates – if we turn to them in a jam, we'll be paying for the privilege. Seriously, we'll be paying. A lot.
It's not like borrowing $50 from a friend and paying back $50 – they'll be asking for more like $158 in return! Interest rates can run north of 500 per cent.
Tools like Sorted's debt calculator can help us run the numbers on the true cost of debt (and hopefully help us run for the door when the costs become too frightening).
Shocking numbers
Ideally we'd find alternatives to the high-cost payday options out there, but it's not easy when we're under the gun.
The most shocking number I've heard of late is $60 million. Or perhaps it's $2.5m. Both are unbelievable. But they're both true.
The first figure is the amount of capital now available for microfinance loans with no or low interest.
That's right, some loans are without any interest at all. I'm sure you'll agree, $60m is a lot of dosh available to lend to people who have a low or limited income. And since that $60m is capital, that means it can be loaned out again and again.
The second figure, $2.5m, is the amount that has been loaned out to date – not very much at all. That still leaves at least $57.5m available to help borrowers.
The microfinance option
Microfinance loans are not exactly alternatives to payday loans, since they're best used for bigger purchases like cars or whiteware – necessities of life. But I can't help but think that some of us would not have to turn to high-interest payday loans if our bigger loans for, say, cars were using the low-cost funds available.
We'd have less of our income going to pay nosebleed interest rates from deals that are just a punch in the face – financially speaking.
Microfinance borrowers have already ducked that punch and saved $1.4m. That's just on interest and fees.
If you're looking to do the same, see nils.org.nz and stepuploan.org.nz. One reason that not much has gone out the door is that these loans are only available via Good Shepherd NZ at 20 locations. There is a small team of about a dozen people on the ground loaning them out.
But there is also a very low awareness that these loans are even available, so we need to spread the word. If you or anyone in your close circle could benefit, don't hesitate to hook them up. Let's help people make the best decisions available.
For everything else, swipe left.
- Get Sorted is written by Sorted's resident blogger, Tom Hartmann (@TomHartmannNZ). Check out the guides and tools from Sorted – brought to you by the Commission for Financial Capability – at sorted.org.nz.
