Depending on your circumstances, there may be ways you can save money or reduce your spending to match your changed income level. Before you buy anything, you might like to ask yourself:
Is it a need or a want?
How will I pay for it?
It will help to make a budget to show how much income you have and how much you spend. If you budget each week for things like repairs and medical expenses, you will have this money to spend when you need it. Include small costs as they add up over time. Allow for extra spending, such as Christmas and birthdays.
Talk to your bank about their fees and interest rates, and find out if there are changes you can make that will save you money.
Generally, you will save money by paying off debt as quickly as possible. You could also:
Pay off debts with the highest interest rate (e.g. credit cards)
Combine everything into one loan with a lower interest rate
Pay off your credit card before the due date so you don’t pay interest.
Have enough money in your account for bills so you don’t pay overdraft fees.
Talk to your bank, someone you trust, or a trained budget adviser about your best way to budget to pay off debt.
If you need help from a trained budget adviser, contact the NZ Federation of Family Budgeting Services on 0508 BUDGET (0508 283 438). Their services are free and confidential.
If you have a mortgage you are struggling to pay, talk to the bank to find out what they can do to make repayments easier.
During a difficult period, you may be able to take a ‘repayment holiday’ or change the loan to ‘interest only’. But remember, it’s usually best to pay debt back as quickly as possible.
Before you borrow money, ask yourself whether borrowing is the best way to get what you want. Can you wait for the item while you save? Could you buy it cheaper elsewhere, or second-hand?
If you decide to go ahead, read the loan contract carefully. If possible, don’t sign up on the spot, but take a bit of time to think about the questions below.
Can I afford the repayments?
How long will it take me to pay back the loan?
How much interest will I pay each week?
How much interest will I pay over the term of the loan?
Are there any other charges?
Am I getting the best possible terms for the loan?
Is it the best loan rate available?
Will it cost me extra if I pay it off early?
If your loan has an interest-free or no-payments period, or both, ask:
When do I need to start making repayments?
What are the conditions if I still owe money when the interest starts being charged?
Are there any other charges?
We strongly advise that you talk to your bank or another trained/qualified adviser about your options before you take out a loan.
Try to pay your bills on time. If you know you can’t make a payment on time, contact the company and see if you can make arrangements to pay late, or talk to your bank for help.
Some companies provide a discount for payment on time and some charge a penalty for late payment.