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Man using credit card - Source: ONE News -
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More Kiwis are choosing to buy goods and services with personal loans and hire purchase rather than credit card, credit agency Veda Advantage says.
The agency's data for December 2009 shows a 119% increase in the number of people applying for a personal loan, and a 27.75% increase in the number applying for hire purchase.
At the same time, the number of people applying for a credit card during December fell 26%.
Veda Advantage managing director John Roberts says the figures suggest that people have become more conservative about their finances and are now looking for more formal repayment regimes.
"This is a clear indication that consumer behaviour on how they're approaching credit after the financial crisis has changed," he says.
Roberts says typical credit card interest rates are about 21% whereas more structured loans with regular payments like hire purchase or personal loans are around 11%.
He says Veda is seeing massive growth in debt cards too, which the agency believes is compounding the decrease in credit card use.
The data also shows that applications for mortgages continue to rise - up 28.93% in 2009 compared with 2008. However, Roberts says they would have expected this to be higher if there were more houses on the market.
Defaults on loans in 2009 rose both for small and medium businesses, and consumers. Roberts says SME defaults were up a "scary" 38.46% and consumer defaults appear to be stablising with a year-on-year increase of about 8%.
Roberts says SMEs tend to lag the consumer credit cycle by about
12 months and he expects more credit pressure to come for the SME
sector in 2010.
