Debt Problems - Reduce Debts and Get Help
Our guide explains how to cut the costs of all your debt, shift debts to a cheaper credit card, access grants, WINZ benefits, community support and debt counselling, apply for hardship, check your credit score for free and more.
Updated 21 December 2024
Read this First - FREE Debt Counselling is available all over New Zealand
Read this First - FREE Debt Counselling is available all over New Zealand
- Before you read on, know that debt help and counselling is only a phone call away.
- MoneyTalks is a free helpline for people experiencing financial hardship or unmanageable debt. You can contact MoneyTalks on 0800 345 123. MoneyTalks can provide support on the phone or by email or online chat; MoneyTalks refers people to financial capability and budgeting services all over New Zealand.
- The Citizens Advice Bureau also offers budgeting and debt management counselling in some locations - check with your local branch to see if this is offered.
- Services offered vary from branch to branch, but usually cover Debt Crisis Help, One-on-One Budgeting and Ongoing Budgeting Assistance.
- There are other services - Debtfix and CAP are also free, trusted and effective.
- Debt problems only get worse if unresolved. One-on-one counselling is a proven and popular method to help in even the toughest of debt situations.
- Our view is simple - never borrow more to get out of debt, unless you are borrowing at a cheaper interest rate to repay existing debt. We outline a few ways to do this below, including balance transfer credit cards and low-interest personal loan offers. The less you owe, the less interest and the faster you can repay. Ignore any advice to borrow more.
Debt, and How it Affects More than Just You
Debt always has a solution, even if the size and terms of a debt feels overwhelming. We believe that dealing with debts as early as possible (and never ignoring them) is the best approach to keep control of your finances. It may not feel like it, but you can be debt-free.
Debt is more than just a money issue. Debt affects your entire life. Solutions to debts vary, but the goal of every suggestion outlined in this guide is to get you out of the debt that is causing you stress.
We've put together this debt management guide to offer a way to manage debt issues before they become serious. We recommend for anyone in a situation of debt crisis to contact a local debt advisory, such as the Citizens Advice Bureau who can provide tailored solutions and advice for every situation.
Our guide covers:
The Debt Problems Checklist
Related Guides:
Debt always has a solution, even if the size and terms of a debt feels overwhelming. We believe that dealing with debts as early as possible (and never ignoring them) is the best approach to keep control of your finances. It may not feel like it, but you can be debt-free.
Debt is more than just a money issue. Debt affects your entire life. Solutions to debts vary, but the goal of every suggestion outlined in this guide is to get you out of the debt that is causing you stress.
We've put together this debt management guide to offer a way to manage debt issues before they become serious. We recommend for anyone in a situation of debt crisis to contact a local debt advisory, such as the Citizens Advice Bureau who can provide tailored solutions and advice for every situation.
Our guide covers:
The Debt Problems Checklist
- Take control of your spending
- Cut the costs of your debt
- Dealing with problem debts
- Do you qualify for help from Work and Income?
- Make an Application for Financial Hardship easily by using our Templates
- Make an Appointment for Free Debt Counselling
- The RIGHT people to go to
- The WRONG people to go to
- What to know about bankruptcy
- Online help and community support
Related Guides:
Tired of juggling high-interest debts? Are you afraid of taking on more debt?If you are overwhelmed by debt repayments, there are smarter ways to get back on track than taking on more expensive debt.
Our friends at Money Sweetspot help New Zealanders who are committed to simplifying their finances and becoming debt-free. They help bundle debts into a single, manageable loan at an interest rate likely to be much lower than what you're paying now. With no account fees and no late fees if payments are missed by a few days, it's a way to reset your finances without the stress. Know This: We have no relationship with Money Sweetspot - our only goal is to help people get debt-free and move forward with their lives. Based on what we've seen since Money Sweetspot's launch, we believe they deliver on their promise to offer fair rates, transparent processes, and provide a helping hand towards long-term financial wellbeing. Why Consider Money Sweetspot?
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Are you in a Debt Crisis?
- Debt Crisis is a situation when you are unable to pay all basic monthly outgoings, for example a mortgage or rent, electricity bills and credit card/hire purchase minimums OR
- When your personal debts (excluding a mortgage) such as personal loans, hire purchases, car finance etc exceed your annual after-tax income.
Debt is ugly, but it can be solved
Having debts exceeding what you earn in a year is a path to major stress, although it may take some time before you feel it. Not being able to pay monthly bills is immediately stressful, and because personal debt tends to have higher interest rates and repayment amounts, the effects of a debt crisis are more severe for those with high debts and low-incomes.
Are you hiding debts?
It’s perfectly Kiwi not to want to talk about money with friends and family, but you can be honest with yourself about your debts. The sooner you face up to your debts, the sooner you can pay them off. Our advice is simple – add them all up and know exactly what you owe.
If you’re hiding debts from a loved one that will affect them financially, the best thing to do is to be completely honest. Telling someone does not share the burden, but it does help you to put together an action plan to get through the debt.
Are your debts related to family or health problems?
Debt is often the result of a personal issue, and being in more debt causes stress and depression when it seems too much to handle. If this sounds like you, help is a phone call away - the Samaritans have specific help for money worries and depression.
Frequently Asked Questions
I am in a Debt Crisis. What do I do?
Accepting you have a debt crisis is an excellent start, and reading our guide right now is fantastic. Addressing your debts rather than ignoring them is the first step to solving them.
Step 1: Read our Debt Checklist
Our Debt Help checklist (below) is designed to prevent Kiwis getting into debt crisis by working through several steps to reduce interest costs, but it will still be relevant for those who are already in a debt crisis situation. We recommend reading it and noting anything that is relevant.
Step 2: Get Debt Counselling
New Zealand has many great counselling services available, which we list below. Contact them directly to set up a free meeting. Debt counselling assists with applying for hardship relief, negotiating with creditors and applying for bankruptcy if necessary. There are a number of consequences of declaring bankruptcy, which we outline below.
Step 1: Read our Debt Checklist
Our Debt Help checklist (below) is designed to prevent Kiwis getting into debt crisis by working through several steps to reduce interest costs, but it will still be relevant for those who are already in a debt crisis situation. We recommend reading it and noting anything that is relevant.
Step 2: Get Debt Counselling
New Zealand has many great counselling services available, which we list below. Contact them directly to set up a free meeting. Debt counselling assists with applying for hardship relief, negotiating with creditors and applying for bankruptcy if necessary. There are a number of consequences of declaring bankruptcy, which we outline below.
I don’t have a Debt Crisis, but I may have a Debt Problem. What do I do?
A debt problem is quite common in New Zealand households and easily managed with some initiative. We recommend going through our debt checklist in detail.
The Debt Problems Checklist
Our checklist below has been written to make you aware of your entire situation so you can tackle your debts effectively. Our aim is that by using this guide you can reduce the cost and size of your debts. We recommend reading it and making notes where sections apply to your situation so you can work towards becoming debt-free.
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Take control of your spendingThe following tips are some popular ways to manage your cash and reduce your expenses to help tackle debt problems.
Prepare a Budget The majority of people with debt problems do NOT have a budget. Only by knowing what you spend and where you spend it, can you have a chance of cutting back. Download a budget tool (Westpac's tool is the most comprehensive currently online in New Zealand); the idea of a budget tool is to keep your finances healthy by identifying what you spend money on and reduce it at a per-item level. Get help paying the mortgage If making mortgage payments is a struggle, consider making an application for Financial Hardship, as outlined in detail in the section below. This can give you some breathing space to focus on more problematic (and expensive) debts. KiwiSaver Hardship Application If you can provide evidence that you're suffering significant financial hardship, you may be able to withdraw some of your KiwiSaver balance. This includes instances of being unable to meet minimum living expenses, unable to meet mortgage repayments on the home you live in and a number of other situations. Applications are assessed by the KiwiSaver provider you are with, not the government - with more details outlined here. If approved, you can withdraw as little or as much of your KiwiSaver balance (not including the $1,000 government kickstart and contributions). Know this - KiwiSaver and debt repayment
Related Guides: |
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Cut the costs of your debtYou’re probably paying too much right now on your current debt. The best way to manage debt is to have the lowest interest rate, as your debt is immediately cheaper and easier to repay. Loan consolidation deals are common, but we suggest only considering them if the interest rate they offer is lower than your current interest rate.
Use Balance Transfer Credit Cards If you are struggling to pay off your bill every month, the interest bill will likely be a significant portion of the debt you owe. Many banks offer low fee credit card balance transfer deals which can last up to 12 months and then fix at 5-7% for the life of the balance. If you have a $10,000 debt, switching to a new card could save you up to $2,000 a year. It’s essential to cancel the old credit card to prevent more debt building up. Our guide to balance transfer deals includes bank offers that also include the likes of Q Card and GEM Visa balances. Cheap Personal Loans A personal loan is suitable if your current debt costs are higher than the interest rates offered by personal loans. Best of all, personal loans require regular repayment which means you have a set timeframe for repaying the debt. This is different from credit cards which have no fixed time for repayment. The better your credit score, the lower the interest rate. We have a guide to personal loans and the best deals currently available. But, if the banks are not willing to lend to you, it might be an option to look at a credit union or finance company. They may be slightly more expensive than a personal loan from a bank, but are significantly cheaper than payday loans. Don’t Sit on Cash, Repay Your Debt Any spare cash you have won’t earn much interest, but it will make a dint on your debt and interest costs. If you have spare money in your bank account, log in to internet banking and transfer it to your credit card or loan balance. Even $50 and $100 payments can make a difference. Be aware of credit card minimum repayments Credit cards are designed to keep you indebted for years. If you only make the minimum repayment every month, it will take you decades to repay a $4,000 balance. In fact, an account holder with a $4,000 balance, consistently making monthly minimum payments of $120 (3%) will pay $1,000 of interest over one year and still be left with around $3,400 to pay. And that’s without considering standard account fees and any additional penalties or extra interest that is charged if a payment is missed. Paying off as much as possible on a credit card makes it much easier to reduce long-term debts. Check your credit score You may have incorrect information on your credit history which is preventing access to cheaper finance. Our credit score guide outlines tips to get your credit history in order. |
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Dealing with problem debtsIf you have been through your debts and can't cut the cost, or have cut the cost and are still struggling to make repayments, it's time to look at some more severe measures.
Talk to your lender(s) Letting your lender know about your situation is important, especially if you are going to be unable to make a payment. They can provide guidance on what they can do on their end. Check your eligibility for assistance from Work and Income New Zealand (WINZ) If you are earning under $40,000 and have children for example, you might be eligible for help. WINZ offers benefits and loans on a case-by-case basis. Look at Working for Families and other entitlements. Asset limits apply, and are usually around $1,000 - although the limit does not include what you need for day-to-day living, eg your home or your car. See the WINZ section below for more details. Microfinance loans and advances A limited number of charitable ventures operate in New Zealand, offering interest-free loans for specific purposes, as well as debt relief. They can help you pay for essential items for your home or other things that you cannot pay for in a lump sum, such as clothes and furnishings.
Sadly, demand is enormously high for these services and each charity is limited by the total money they have to lend. If you think you qualify and urgently need the help, it is a good idea to contact an organisation and apply sooner rather than later.
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Do you qualify for help from the Government?The Government offers loans and benefits which are an alternative to getting more in debt. You don't need to be an existing beneficiary to be eligible for many of the entitlements.
Urgent Costs
You can apply with WINZ directly – income limits apply - look at the details and see if you qualify. Best of all, any repayments are set up to be dependent on what you can afford to pay. But, demand is very high for these services and WINZ may not determine your needs to be “urgent” and may decline your application. However, it’s easy to apply and worth the effort. |
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Make an Application for Financial Hardship easily by using our TemplatesThe Credit Contracts and Consumer Finance Act (CCCFA) allows any person with a credit contract (i.e. a debt) to apply to the lender for hardship relief when experiencing an unforeseen change in personal circumstances. This can include:
It’s law that every lender must consider an application. The contract can be changed under the Hardship provision to allow:
When can I make a financial hardship application? It's a good idea to make an application as soon as possible if you know you will struggle to pay one or many debts. Importantly, you can’t apply for hardship if:
Your make a hardship application directly with you lender, although you can only make one application every four months. If you have a number of debts, it is best to make the hardship applications all at once. Full details can be found on the Commerce Commission's website. Making an Application for Financial Hardship easily by using our Templates To have the best chance at a successful application, we have put together two files. The first is a template letter for making an application of Financial Hardship, and the second is an Excel spreadsheet to calculate a summary of financial position (i.e. your income, debts, assets etc). You can complete BOTH in around 30 minutes to one hour, and MoneyHub readers find these immensely helpful in structuring their application and ensuring all the important pieces of information are mentioned. Many companies have their own financial hardship application forms available. To find them, Google the name of the company with whom you have the debt , adding "Hardship Application", to see if they have forms. If they don't, they still MUST consider your Hardship application, and it's best to use our templates above. We have included a few hardship applications forms below to illustrate the range of options available.
Has your hardship application been declined? Don’t panic. There is help available. Your local Community Law Centre can advise on re-applying and you can also go to the Disputes Tribunal. Our template above is New Zealand’s most comprehensive, so if you haven’t used it we recommend it for subsequent applications. See the Commerce Commission's guide to a lender's obligation and your rights when making a financial hardship application. |
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Make an Appointment for Free Debt CounsellingThe excellent Financial Capability website has affiliated debt counselling branches all over New Zealand which provide free advice and debt support services. The services they offer vary, but usually include:
Ask for the help of an Employee Assistance Professional (EAP)
How do I access an EAP, and are my details safe? To access the service, you need to ring the EAP organisation promoted at your workplace and make a booking directly with the professional. The workplace is then billed for the service, but they do not know which employee has accessed the service, just that somebody has. EAP professionals used are all vetted in terms of qualifications, experience, professional registration, supervision and code of ethics, and they must be impartial. What financial advice or services are provided? Can an EAP help me with debt?
Debt Counselling
Specific EAP providers who offer financial services: Another option: Debtfix
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The WRONG people to go toAvoid any debt help or loan consolidation companies that you hear on the radio or see online - they have one aim, and that is to make money out of you. This is not what you want, and definitely not what you need.
Any 'plans' they set up will involve you paying them a fee, and this means it will take longer to repay your debts. With so many free volunteer-based options (as outlined above), there is no need to agree to these types of services. |
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What to know about bankruptcyLooking to declare bankruptcy is serious, and has long-lasting effects on your financial freedom and ability to function in society. There are two options available, depending on whether or not you owe less than $50,000 in total, or more than $50,000:
1. Debt Repayment Plan (or Summary Instalment Orders - SIO) If you owe less than $50,000 in unsecured loans (excluding student loans, fines, penalties, and reparation orders, etc.), you will likely qualify for a Debt Repayment Plan (or Summary Instalment Orders - SIO) which gives you extra time to pay back some or all of your debt — usually 3 years, though it can be more or less than that. You will have an appointed supervisor, who works with you to help pay back the debt. However, there are consequences of taking an SIO, which we summarise below:
2. Applying for Bankruptcy
Next Steps Making the decision to start an SIO or declare bankruptcy should not be taken lightly, and in almost all cases, should be the last option available. Our bankruptcy guide has more details. |
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Online help and community supportOne comforting fact is that when it comes to personal debt, you are not alone. Debt levels are at record highs in New Zealand and most people have their own debt issues, which might be similar to yours.
Debt stress comes at all hours. Because of the lack of online forums and communities in New Zealand, asking for help online is somewhat limited. However, resources are constantly being launched online. |
MoneyHub wants every New Zealander to have the tools to become debt-free
Debt problems are common all over New Zealand, and this site is used by thousands of people every month in various level of debt, all looking to become debt-free. If you have the right support systems in place and the willpower to become debt-free, it can happen. The MoneyHub team knows how stressful debt can be, and if you have any specific help or tips you wish to share, please get in touch. Be assured, your email will never be passed on or shared publicly.
