Kate Nichol, a single mother of three living in the suburbs of Melbourne, is grappling with the rising cost of everything.
“We’re living a week-to-week life right now and it’s very stressful,” she said.
“This Christmas is so stressful because of the rent increase, the bills, the increased cost of living, the cost of food and everything else,” she said.
“It’s getting harder and harder to be a good mother.”
She is one of many Australians struggling with rising rents and living costs.
Kate looks after her two sons, ages 12 and 9, and her youngest daughter, 3.
In recent months, the 33-year-old, who is currently without paid employment due to increasing financial pressure, has applied for an interest-free loan to buy household items.
Across Australia, the Interest Free Loan Scheme (NILS) allows eligible individuals to access small, targeted loans with no hidden interest or fees.
The program is run by the not-for-profit organization Good Shepherd and supported by National Australia Bank.
She borrowed $1,200 and was able to purchase several household items, including a vacuum cleaner, steam mop, dryer, television, and tablet. These will be Christmas presents for children.
“Centrelink sends it automatically so you never forget to pay,” she said.
“It’s very convenient because it’s broken down into easy-to-pay amounts of about $38 per fortnight.”
The loan period is 2 years.
“Knowing that I can give my kids something nice and not have to worry about spending a lot of money all of a sudden takes a lot of stress away,” she said.
The Good Shepherd scheme offers interest-free loans of up to $2,000 for essential items such as white goods, car repairs and registration, technology, and medical and dental costs.
This loan can also provide up to $3,000 for interest, rental deposits, rent advances, or natural disaster expenses.
The recipient does not receive cash. The loan is exchanged as a direct payment for the goods and services requested at the time of application.
More men and workers applying for loan schemes
At Sunshine Library in Melbourne’s western suburbs, volunteer Mai Nguyen can be seen helping local residents, mainly from the Vietnamese community, apply for interest-free loans.
Mai Nguyen is Chair of Australian Vietnamese Arts & Culture, a volunteer-run organization that promotes cultural performances, festivals and community events.
We also provide support services to members of the local community and over the past five years have helped hundreds of people, many of whom speak no or limited English, apply for interest-free loan schemes.
The team of volunteers who help people apply have been busier than usual lately. She said the number of loans has increased by 60 to 70 percent in the past six months.
“We have two groups that have never come to us before,” she says.
“Typically, 95 percent of loan applicants are women, but these days we’re also seeing men coming in because they’re desperate,” she says.
“Culturally, they are the main breadwinners of their families and they don’t go out to take out loans, but they’ve been having a tough time lately,” she says.
She said the second group is people who have jobs, but maybe something has changed, whether their hours have been reduced or their part-time hours aren’t enough to cover their needs. He said he could not.
“They’re really grateful… They get help, and it’s very quick,” she said.
More people are suffering, service report
What Nguyen is seeing is backed up by a recent study by Good Shepherd, which found that a wide variety of people are taking advantage of the program as the cost of living becomes increasingly strained.
“What we’re really seeing is a shift where people who are actually earning wages and salaries are applying for interest-free loans,” said Dr. Jojika Kutin, director of research at Good Shepherd. .
“People with slightly higher incomes have similar challenges and need secure and affordable credit,” she said.
Singles with incomes of less than $70,000 or single parents or couples with incomes of less than $100,000 are eligible.
“There’s no interest, there’s no penalties, you just pay back what you borrow,” she said.
People who have experienced domestic or family violence or who have medical insurance or pension cards are also eligible.
Dr Kutin said people may be reluctant to seek help or think their situation is not that bad.
But she said it’s always good to seek help as early as possible, and that eligibility criteria has expanded in recent years to include higher income earners.
“Don’t wait until you’re at the bottom of the hill or until things get so bad that you’re in total financial stress and destitution,” she said.
Credit account and interest accrued balances are the same as the same period last year
Latest Reserve Bank of Australia data on credit card usage shows that outstanding credit balances rose in October this year compared to the same period last year.
The total amount was $17.4 billion, compared to about $16.9 billion during the same period last year, still down from pre-pandemic levels.
Although the number of personal credit accounts remained below pre-pandemic levels, it has recently been on the rise, with the number of personal credit accounts totaling 12.6 million in October, the highest level since March 2021, according to the latest RBA data. It became a number.
But credit reporting firm Equifax said demand for credit cards appears to have declined in recent months as consumers cut back on non-essential purchases.
Victoria’s director of financial counseling Jill Hobenga-Wauchope said some of the data was difficult to interpret because it was compared to the pandemic period.
He said some consumers are turning to buy now, pay later products instead of credit.
“It’s more of a slow burn than a dramatic rise,” he said.
“If this situation continues and other conditions do not improve, I am concerned that more debt will be repaid at higher interest rates,” he said.
More people are offering buy now, pay later debt to financial services
Mr Jobenga-Wauchope said demand for financial counselors in Victoria had soared throughout 2023, creating long waiting lists and putting pressure on service providers.
“Not only are there far more people seeking help, but those who actually ask for help are given more.” [than] They need help because things like that are happening,” he said.
He agreed that interest-free loans are a good solution for people under financial stress, but said interest-free loans are only available to certain groups of people under certain circumstances.
It also recommends contacting a financial counselor or contacting your bank, real estate agent, or utility company if you are experiencing difficulties. Because it can be of great help.
He said it’s especially important for people experiencing financial stress to be wary of financial products such as credit cards and buy-later, pay-later schemes where fees and charges can cause problems later. He said that.
He said these short-term solutions were becoming a “problem” for many people as tough economic times continued.
Nicole said she tries not to use credit cards, but the buy now, pay later system helps her buy things she wouldn’t have otherwise been able to buy.
But she said interest-free loans were much less stressful than services like Afterpay because they were for a very long time and were paid directly from welfare payments.
“I know I’m not the only one struggling, and it’s actually helped me a lot,” she said.