"What we try to tell people when they come see us is going after that quick fix is like putting a Band-Aid on a broken leg. It feels good for a short amount of time but that wears off and they are faced with a worse problem than they had before.
Ms Pavitt also warned of people borrowing because interest rates were low.
"They may be low now but we have no idea how that's going to look six months or even six years down the track. We could see interest rates suddenly jump and rather than paying $4000 off a $100,000 loan, you're paying $10,000."
Budget adviser and community educator Runa Morrison-Huitema said they had seen a very high influx of people seekingadvice on various debts.
"It doesn't surprise me at all that Rotorua was higher than Auckland. There is a mentality with some borrowers that they need their wants now, even if they know they will experience hardship down the line.
"In my years of experience as a budget adviser, I've found borrowers are not reading the contract carefully and can't see past the instant gratification the loan gives them."
Ms Morrison-Huitema said the situation was a "nightmare".
"All we can do is get out to the community and try educate people as best we can and encourage them to not take loans out."
She said those defaulting on their loans were often beneficiaries living in some of the poorest socio-economic areas in Rotorua.
"Often they are taking out a new loan when they haven't finished paying off the last one."
She said many borrowers were getting loans to pay their living cost arrears for power and rent, or pay for other debts.
Instant Finance Rotorua supervisor Karen Baldwin said she considered Rotorua's debt owing to finance companies and credit unions to be quite high for a small region.
"What we've noticed most, particularly this year, is the influx of people coming to us. For some of those their loan goes pear shaped . . . We always hope to get the money back but at the end of the day it often comes down to being a write-off.
"When debtors declare insolvency they are basically putting their hands up. Often they have loans with a number of different agents and it becomes too much to handle. We encourage our clients to talk to us and educate them about how to manage their money but there needs to be an attitude change about borrowing money."
She said her clients ranged in age and were a mix of immigrants and residents. In her experience, those defaulting on their loans were more likely to be single mothers.
"We also get a lot of white collar people looking for bigger loans who want another option to a bank so our client base is really a cross-section of the community, not just those looking for a quick fix."
Ms Baldwin said a lot of their finance was for debt consolidation which was paid direct, not to the client.
"We also get immigrants on a one-year working or studying visa looking to get finance to fund their study. Buying cars is another one we finance that we get a few clients in for."
She said a lot of the issues came from people being ignorant about how to properly manage their finances.
"There are definitely people who see loans as free money and think they can avoid paying it back by jumping from bank to bank. Some think they don't have to pay it back at all which shows the ignorance of some people.
"The good thing is a lot of the finance companies still around today are a lot less gung-ho, focusing on building relationships and approving loans in the best interest of the client."
Money managing tips
- Build a budget you can stick with
- Seek help from budget advisory services
- Stay on track with your budget by keeping a spending diary
- Consider the true cost of a loan before committing, (this includes the interest you will be repaying)
- Research all your lending options before committing to one
- Pay for expenses (such as living cost, nights out and holidays) from income or short-term savings rather than loans and credit cards charging interest
- Set achievable financial goals - be specific, realistic, and write them down
- Review your goals every six months and when you achieve one, celebrate
- Make sure everyone in your household is on board and understands the budget and financial goals
- If juggling several debts, pay off those with the highest interest first to limit the total amount you have to pay
- www.sorted.co.nz
