October/November 2020 - Bay of Plenty Business News

October/November 2020 BAY OF PLENTY BUSINESS NEWS 9
How to avoid or get out of debt
One of the things that have really helped me in my role as a debt
advisor, debt prevention advisor and especially a repossession
company director, is that I genuinely understand debtors, debt
collector avoidance and general debtor behaviour in a way that few
in my industry do.
CREDIT CONTROL
> BY NICK KERR
Nick Kerr is Area Manager BOP for EC Credit Control NZ Ltd.
He is also a director of International Private Investigations Ltd.
Nick can be reached at nick.kerr@eccreditcontrol.co.nz
The reason comes not
from in-depth analysis or
my 15 years’ experience
on the frontline of collections.
Why I understand debtors
– and particularly habitual
debtors – is because for years
before my foray into credit
management I was one. When
I say I was one I don’t mean
that I had the odd bill that went
a bit overdue. I was a proper
phone call screening, constantly
moving, habitual credit
vampire with a -192 Equifax
credit score and every major
credit control company in New
Zealand chasing me.
I calculate that before my
personal credit revelation I
was around $200,000 in debt
and weeks if not days away
from bankruptcy.
Using the methods that I
outline below, I was able to
not only reduce my indebtedness
to zero and restore my
credit score to an optimal one,
I was able to implement rules
and strategies that will ensure
I never fall into the debt trap
ever again.
Domino Strategy
This strategy was taught to
me years ago by a property
developer who was able to
trade his way out of $1million
debt amassed through a development
that went horrendously
pear-shaped.
How it works is: let’s say
you have 10 creditors that you
owe $1000 to and you have
$1200 per month available to
pay.
You contact each one and
after outlining your situation
(honesty is vital) you commit
to paying $100 to each per
month for 10 months, which
they accept in writing (making
it binding on both parties and
preventing collection action).
With the remaining $200
you pay an additional $200 per
month on the oldest debt allowing
you to pay this off three
times faster. Once this debt is
cleared in full, you then add
the $300 available to the $100
you are paying on the second
oldest debt, allowing this to be
paid four times faster, and so
on until all debts are cleared.
This strategy has three
outcomes, it clears your debt,
avoids credit defaults on your
credit file and also helps restore
your credit reputation as
the creditors expect it to take
10 months to be paid and are
If Covid-19 has
taught us nothing
else, it has driven
home the importance
of budgeting. There
are many free
services that can
assist with this if
isn’t your forte.”
all pleasantly surprised.
Without fail, all of my current
9000 clients would accept
a payment plan with certainty,
rather than a hope of eventual
payment. As with everything
in life, honest and early communication
is key.
Avoid Debt
Consolidation loans
Many finance providers market
“Debt Consolidation
Loans” to “ Clear” your debts.
This can sometimes this can
be a good idea, providing that
the debts that you have allow
for early repayment without
penalty. But often you can end
up paying not only the interest
on the new loan, but a good
portion of the original debt
interest and “Break” or “early
repayment” fees.
These consolidation loans
are marketed for their ease
of use, not their reduction of
costs. This is especially true
if you use a broker who may
have a not insignificant broker
fee that is also incorporated.
Do not hide
In my experience as an investigator,
there has only been
one person that we could not
find out of more than 600
cases. That person has never
had a credit score or bank
account, lives in a tent in the
bush that he moved weekly,
avoided town centres and any
business with CCTV, and had
no digital footprint.
My point is that, unless
you live like this person, you
will be found. Hiding just
makes your debt larger (tracing
and investigation fees can
often legally be added to your
account).
If you cannot pay a debt
make early contact and ask
about options. Many finance
companies have insurance that
is built in to your loan that can
cover unexpected job losses or
sickness. Early honest contact
will make the creditor much
more likely to earnestly explore
these options and fight
on your behalf.
Insurance is vital
We have dealt with numerous
people that we have had to
chase for debts because of unexpected
costs that would have
been covered by insurance.
If your income changes talk
to a good, well-recommended
insurance advisor who can put
in place affordable insurance
to avoid these unexpected and
unwelcome additions of debt.
Quit expensive habits
I would say that around 80
percent of the debtors that our
company repossess cars from
are cigarette smokers. What is
the correlation?
The average weekly payment
on these finance loans
are $85-100 per week – a one
pack per day smoker buying
the cheapest smokes available
is spending around $25 per
day.
I’m no math’s genius, but
those numbers do seem to be
rather similar. When I was on
my road to credit redemption I
had to choose either my habits
or my future. Stopping one
paid for the other.
Keep your budgeting
tight
Most of the people I have
worked with who have navigated
their way out of debt and
stayed out of it, have a strict
budget.
Remember that people with
umbrellas aren’t overly affected
by the rain and people
that properly prepare for a
budgetary deficit can also remain
relatively unaffected.
If Covid-19 has taught us
nothing else, it has driven
home the importance of budgeting.
There are many free
services that can assist with
this if isn’t your forte.
The above is not intended
to be prescriptive, just techniques
that worked for me and
many others.
Just a thought.
Racing to the top – meet our newest Associate
Congratulations to Rebecca Steens, who works in our litigation team, on her promotion to Associate.
Rebecca returned to Tauranga earlier this year and joined
our litigation team after four years working at a global
offshore firm based in Jersey, in the Channel Islands.
She has a range of experience and expertise in general civil
litigation matters with a particular focus on trusts and
estates, as well as commercial disputes, directors’ claims
and insolvency.
Rebecca enjoys working with clients and developing
pragmatic solutions. In her spare time, Rebecca
is a competitive road cyclist, and is a member
of a women’s cycling team sponsored by the firm.
Rebecca is looking to continue her success whether
in a race or in a Courtroom, and we are proud
to welcome her as our newest Associate.
Rebecca Steens
Associate
DDI 07 570 0687 rebecca.steens@hobec.co.nz
Tauranga / Rotorua / Whakatane / Opotiki
hobec.co.nz
HOB25875 BOP_BN