The debt trap: Woman rues use of credit

Case study:

Alice* never imagined she would be spending her pre-retirement years fighting her way out of debt. When running an antiques business in a provincial town with her partner, she admits she didn't really think much about debt.

But when her relationship ended and the business had to be wound up, things unravelled rapidly. There were debts owing on the building and she had to pay off the lease.

"I lost what little I had - I ended up with no car, nothing."

She moved to Auckland to start over, using her credit card and hire purchase arrangements to set up house: a fridge, washing machine, bed and a stereo - "just the basics but good stuff".

A trained journalist, she bought a computer on HP so she could resume freelance writing.

She ended up owing money to two finance companies and $9000 on her credit card. That was six years ago and she is still paying back creditors.

"The cost of interest is huge. I really feel you get seduced by retailers and finance companies. Every day on the radio and TV you get hammered [with advertising and loan offers].

"It's the need to have all the goodies, all the technology - everyone seems to be borrowing. It's so easy to get money but it's so dangerous. A few years ago they used to grill you to get any sort of money. Now you just have to click your fingers."

To reduce her rent, she moved to a one-bedroom cottage in a rural town but found she needed a car, which soon needed repairs.

After approaching a budgeting service, she learned there are ways out. The adviser opened her eyes to hidden bank charges and ways to reduce outgoings - things as basic as meal planning - and boost her income. A keen gardener, she now does paid gardening as well as freelance journalism to boost her benefit.

"A lot of people are too proud and think going to a budget service signals that you're a bad debtor. They bury their heads in the sand - they think it's going to be okay, but it isn't. They need to go."

Her adviser negotiated with creditors to ease her weekly repayments and her garage agreed to regular payments. But she lives on $100 a week after the rent is paid.

"It's a day-to-day thing for me, I have to be careful and not panic. I don't have a lot of luxuries, I don't go out a lot but there's a basic line you need to maintain or life is not worth living. I want to get out of debt as quickly as possible and never get back in."

* Not her real name.