Loans are so easy to get.

Google the words: 

"I want a loan" and you'll be offered the Earth. Up pop the words: "Quick cash", "money in your account within 60 minutes", "simplify your debt", "same day loans", "design your own loan", "Satisfy any shopping urge", "take your family on a much-deserved trip".

It sounds so friendly.

But there is money to be made lending cash to Kiwis to fulfil their every whim — and the sharks are circling.

Loans don't always "make life easier". They can spiral out of control. Borrowers get black marks on their credit records and can end up bankrupt and even suicidal in some instances.

Here are some everyday disasters that can occur and many I have witnessed

  • Robbing Peter to pay Paul

When borrowers get in a financial pickle the first instinct is to borrow more, says Rob Collins, general manager of NZCU Auckland, a credit union. "They think, 'Oh, I can't pay this, I'll just get a top-up, it will put me right'." But a week later they still can't pay and get another top-up.

  • Taking out more than you can afford

It's too easy to get a car loan here, an HP there, a line of credit here, an Afterpay loan with Trade Me, a GEM and Q Card and a couple of credit cards. Then something unexpected happens and the house of cards collapses.

  • Not understanding the interest rate

There is a big long-term difference between paying 12 percent and 20 percent on a personal loan. Even worse, borrowers sometimes take out loans at a daily amount. Moola's 1.5 percent a day adds up to a 547.5 percent annualised interest rate. Most lenders have stiff fees and penalties as well.

  • Multiplying debt

If you don't pay your bill in full each month, the debt grows and grows. Even credit card debt will inflate if the borrower only makes the minimum payment.

  • Never-ending payments

When you take out HP/ interest-free deals, you're given a store/credit card, which you can often use in more than one retailer. Cards such as Q Card or GEM Visa then shower you with offers to encourage you to buy more.

  • You'd assume that your monthly payment would go towards paying down the first item you bought.

But that's not always how payments are allocated. Instead, your payment on your TV might be allocated to the mag wheels that you bought later, meaning the original purchase is not paid off before the interest-free period expires. By Dianna Clement

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