Beware of short-term credit, and debt ‘fixes’
The economic impacts of COVID-19 restrictions on businesses and employment have been significant. In the early days of COVID-19, the Government responded to the health and economic ramifications by increasing welfare support to eligible individuals and businesses.
This included Newstart benefits being increased in March 2020 with the JobSeeker coronavirus supplement, and the JobKeeper Payment scheme to help businesses pay eligible employees where business was affected by COVID-19.
These income supplements were recently reduced. The JobSeeker supplement has been extended to 31st March 2020 but was reduced from $550 to $250 a fortnight for a single person with no dependants and likely to fall to $150 over this period. The JobKeeper payment has been extended to 28 March 2021 but with reductions to the payments over this period.
Will the reductions result in more debt than you can afford to repay?
Repayment holidays and reductions in repayments introduced by many lending institutions and utility providers to assist with financial hardship at the beginning of COVID-19 may now need to be renegotiated. You may have ended up with more debt than you can reasonably manage to repay. It may be tempting during this time to look for short term solutions to alleviate the repayment stress, such as borrowing more money or using more credit to pay bills or use to pay down existing debt. This often results in a debt-spiral with borrowers being worse off than before.
Where can you seek help?
We strongly recommend that you seek help to manage the debt you already have rather than borrowing more. A valuable avenue for assistance is a free Financial Counsellor. Financial Counsellors assist people in financial difficulty by providing information and support to help you deal with your financial problems, manage your debts and alleviate the stress of being in financial hardship. Often Financial Counsellors will advocate and negotiate on your behalf with your lenders. You can find your local Financial Counsellor at the Financial Counsellors Association of NSW or at MoneySmart.
You can contact Marrickville Legal Centre online or call on 02 9559 2899 to request an appointment for legal advice, especially if your lender has threatened to, or has started legal action against you to recover money owed.