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An Australian legal centre has warned of the dangers of taking out loans or utilising buy now, pay later services, with Christmas expenses taking their yearly toll.
According to the Financial Rights Legal Centre and Mob Strong Debt Help, Aussies often find themselves in debt following the festive season due to high expenses being spent over the period.
Financial Rights Legal Centre chief executive officer Karen Cox said while taking out loans or using buy now, pay later (BNPL) services to cope with the added pressures, these options could be the start of an ongoing debt trap.
“We often see cases of people who find themselves in difficulty upon realising they cannot meet their loan obligations on top of their living expenses,” Ms Cox said.
“Many people also end up in financial hardship because they take out loans to cover existing repayments.
“It’s important to know that help is available, if you end up in these circumstances.”
Ms Cox’s comments follow a recent report by the Australian Securities and Investments Commission which highlighted that 21 per cent of consumers who utilised BNPL services have missed a payment in the last 12 months and as a consequence are paying late fees.
A further 20 per cent had to cut back on essential expenses, including food, to meet the repayments and 15 per cent had to take out a loan to meet the payments.
Commenting further, Financial Rights Mob Strong co-ordinator Amanda Cameron said there are important steps people could take to help avoid the pitfalls of debt.
“It’s always best to try to stick to a budget to manage holiday period expenses. If you really need to borrow, try to keep the amounts to a minimum to ensure it’s as easy to pay back as possible,” she said.
“If you do use the option of a loan, always budget to make sure you can afford each instalment and ensure that each instalment won’t be deducted from your bank account before you receive your next pay.”
