Many people are subject to complacency when it comes to keeping up with their expenses. Research by comparison website Finder, indicates that as much as 87% of Kiwis are paying a lazy tax on financial products like home loans, car loans, personal loans, and income protection insurance.
‘Lazy tax’ is when people overpay on many common, repeating costs or fall into the trap taking on loans they can’t afford. The effort it requires to look around for better deals on the regular, negotiate and compare price structures is not there. This can result in stress inducing debt and unnecessary financial burden. The best way to avoid this loss lies in regularly making price comparisons and negotiating for better new deals and upgrades. While not an official tax, it is a cost paid when consumers get too lazy to do the research and end up staying with the same provider for too long.
Consumers were likely paying a lazy tax on 53% of car loans, 52% of personal loans, and 54% of income protection insurance products. It also found that men were more complacent than women in some segments. 36% of men appeared to be paying the lazy tax on home loans compared to 30% of women.
Younger borrowers were also paying this higher cost with an estimated 60% of Generation Z and 28% of Baby Boomers found to be paying a lazy tax on home loans. Consumers however appeared less likely to be complacent when it came to their mobile phone plans. In this segment, just 27% were found likely to be paying a lazy tax.
Angus Kidman, editor for Finder, says it is shocking how many Kiwis are missing out on a better deal. Many people tend to only do their diligence when first signing up, but miss better deals that come out later. Something as simple as calling up to negotiate can often get you better rates.
It’s important to check on the interest you’re paying with your loans. Financial literacy is key to overcoming debt. Getting a better deal for a loan can mean less debt for New Zealanders. Be aware of pay-day loans which come with high interest rates which make paying debt off difficult. Many loans are sold to the financially ill-informed so it’s important to seek loans that will make you better off.
Kidman also mentioned that though the average credit card interest rate was 19.4%, some providers were offering rates as low as 9.95%, indicating that many people who had not reviewed their plans were likely paying more interest than they needed to.
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