We sometimes need to create a debt in order to get the things we need or let’s face it, the things we may want but can’t quite afford at the time. Your Bank Manager and many financial Gurus will say that as you progress in life you need to improve your credit rating in order to provide access to more borrowing. This is with a view to having the borrowing power to purchase larger things such as a house. A place to live that can also provide us with financial capital in the future. To some, owning such capital is merely a pipe dream. Without a reasonable credit rating borrowing such large amounts is reasonably hard. Or at least it should be which is at the heart of the current problems with Australia’s personal debt issues and outrageous housing costs.
So debt is OK? Debt is OK but only if it is manageable debt. That makes more sense. It’s only when we can’t repay the debt that the nightmare of long-term debt begins. What could be considered a small debt can be amplified by factors like interest or associated penalties to a point where it seems we can never pay it off and failing to meet your payments can also effect your credit rating.
Its not the stereotypical Hollywood scene of a run down, out of the way shop you walk into or some sleazy character in an old tweed jacket behind the counter wearing far too much bling giving you a potentially bad deal on a high interest loan. A potentially bad deal is available from cute furry animals or goofy Wizards or even directly via your phone. Your favourite retailer with their associated credit cards can even bring you financially undone if you can’t meet the payments or if you only ever pay the minimum amount. Debt is never a case of getting it and just moving on.
The relatively new Afterpay app sweeping across retailers may have the potential to keep the Money Bunnies quivering in their burrows and Wally wizards wasting away. Afterpay is similar to the old-fashioned lay-by system in the way it provides for several payments over time. Although there are no direct interest charges and some helpful continued borrowing prevention there are some concerns over the fees charged and penalties as well as the credit code loopholes it avoids. The fact that in only a short space of time the company’s revenue has accumulated some big profits from the penalties and fees charged to consumers unable to meet their payment options. This signals a cautious warning to the welfare agencies.
The Moneysmart website has a great range of detail about how to avoid problems with loan debt including Payday lenders and provides information on borrowing basics and a wealth of other debt issues:
https://www.moneysmart.gov.au/borrowing-and-credit
Afterpay it seems a bit too early to have identified or assessed any associated issues so like all debt options the best thing is to consider your ability to meet the repayments or if you really need to borrow at all.
As there is an app for getting into debt there is also the Affordable SA app that can help you access support to deal with debt and other cost of living issues. For certain essentials such as a fridge low-income earners can access a range of better choices such as a No Interest Free Loan, see the app for details and other great money saving services. Download the Affordable Sa app available on Apple or Google play store or visit the website at www.affordablesa.com.au to get informed or ring the Helpline on 1800 025 539
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