Wisr's Joanne Edwards on tips to manage your debt

Have you ever considered financial hardship, or felt unsure how debt consolidation could help you?

Navigating a tough financial situation can be tricky - so to help provide some guidance, RateCity spoke to Joanne Edwards, Chief Operating Officer of Wisr, a neo-lender and fintech that is focused on improving the financial wellness of all Australians and helping them make smart decisions.

Wisr Chief Operating Officer, Joanne Edwards

There are so many of us struggling with the cost of living. If someone is struggling to make repayments on any debts they may have, should they ask to be put on hardship straight away?

There are four key things Aussies need to know about hardship:

1. Hardship is a short-term, unplanned event from which you are expected to recover within a short period of time
2. If you are struggling to meet basic bills due to the increased cost of living, the best option is to call your credit providers to discuss your personal situation and seek assistance in the form of a temporary or permanent variation of your credit contract. (Your credit provider is obligated to assess your situation and determine whether they can vary your credit contract to a payment you can afford during hardship.)
3. Your credit score will be protected if you enter a financial hardship arrangement with your credit provider, as they will report your account status as under financial hardship - this information can’t impact your credit score.
4. If you’re in a position to do so, try to make reduced payments to your commitments, e.g. 50-80% and don't ask for a deferral - a deferral is kicking the can down the road and may result in higher interest payments in the long term.

While hardship can help, what impact could it have for any future financial decisions or activities?

Missing payments towards your credit contract are treated differently than financial hardship arrangements with your credit provider. If a life event occurs, such as losing your job or a medical condition, entering into financial hardship with your provider is a more favourable outcome for your long-term credit profile. Whereas missing payments will be reported to the credit bureau and remain on your file for 24 months and will impact your credit score.

Financial hardship arrangements are reported as a flag. However, this flag will only remain for 12 months and will not impact your credit score. The hardship flag is designed to protect you and does not necessarily mean you’ll be declined for credit.

At Wisr, we may not lend new money to someone currently in hardship. However, we will still review applications seeking to refinance as that decision may be favourable for a customer if the interest rate or terms are better.

Once a hardship event ends, your credit score is protected and we will not directly decline these customers. Still, we will review and make enquiries into the individual situation, whereas in the event of arrears, that would be more likely to lead to a decline decision.

When you’re struggling with finance, forming a positive money habit can seem impossible, but what would you say is an easy way to start?

Personally, I find that setting aside time each week to review bills, budgets, and spending habits really helps to clarify how I’m doing with my goals, where I need to go, what I need to work on (like not buying that extra cup of coffee!), and what my wins are.

• Start by working out your weekly non-negotiables. Identify essential purchases like groceries, weekly social activities and household expenses. Once you’ve calculated these regular expenses, you can factor the average cost into your budget to help ensure you have enough monthly cash to cover.
• Direct debiting your bills is a simple but effective way to stay up-to-date and keep your credit scores in check. Direct debiting your utilities like internet, insurance and phone bills can help ensure you don’t miss a payment. While direct debiting these payments won’t impact your credit score, a dishonoured payment can.
• Technology can help to save a little more. For example, the Wisr App has a feature that allows users to round up daily purchases (like a money jar for digital spare change). You could then put this difference aside to pay your bills (gas, electricity, etc.), grow your savings or pay down debts. Your everyday transactions, such as groceries, fuel, transport or that morning coffee, could help you save hundreds of dollars each year without additional budgeting.
• Asking your providers for a better deal could help you save hundreds of dollars annually. I make this a yearly ritual to see what deals providers can offer. Researching competitive rates and potential savings could put some cash back in the budget.

Refinancing or debt consolidation isn’t just for home loans – what else can you refinance? How could this help?

Debt consolidation can help you manage multiple debts like credit card debts, personal loans, or other unsecured debts by rolling them into one loan. One loan, one monthly repayment, one interest rate. This can be easier to manage and pay off your debts without having the temptation to spend up to your credit limit again. It can also help to improve credit scores by having fewer active credit products.

When consolidating your debts, it's important to look for a loan with a low interest rate and consider any loan fees, such as establishment and ongoing fees, as this will help reduce the overall cost of your loan. There are multiple pros and cons to consolidating your debts, so doing your research first is important.

Some benefits of debt consolidation are:

• It simplifies the process of paying off multiple debts.
• It can potentially reduce the overall interest and fees you pay, but do the calculations before you sign a contract.
• It can help you to better manage your debt, and good debt behaviour can improve your credit scores.
• It can help you to manage your money more effectively.

Some risks of debt consolidation include:

• It probably won’t address the underlying issues that led to the accumulation of your debt.
• It can lead to an increase in overall debt if you continue using credit cards, buy now, pay later, or take on new loans. Best to close these for good when consolidating.
• It can have a negative impact on credit scores if not managed properly.
• Opting for a longer loan term on your debt consolidation may mean your monthly repayments are lower. However, it could also take you longer to pay off.

What’s one piece of advice you wish you could give your younger self, when it comes to money habits?

Live within your means. If you can’t afford something, do not buy it.

Read any credit contracts fully, and if in doubt, seek independent legal advice. If in trouble, engage with your Credit Provider and do not avoid them - most of the time, they are just trying to help you!

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