Tauira Name:
Xuan Yu
Te Tohu Whakahaere Pūtea
Certificate in Money Management
Kōnae Ako Tuatoru: He Whakapūmau Whare me te
Whakahaere Nama
Module 3: Home Ownership and Debt Management
Whakamātautau Tuatahi:
He Whakahaere Nama
Assessment 1: Debt Management
Tohanga Whakamātautau me te Wātaka Whakahoki Māka
Assessment Handout and Marking Schedule
Version 2.0
© Te Wānanga o Aotearoa, 2017
All rights reserved. No part of this material may be reproduced or copied in any form or by any
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retrieval systems) without the prior permission of Te Wānanga o Aotearoa.
For further information and contact details refer to www.twoa.ac.nz.
This document was modified in February 2020.
Te Tohu Whakahaere Pūtea
Certificate in Money Management
Assessment 1: Debt Management
Aromatawai Hua Akomanga (Learning Outcomes Assessed)

Demonstrate an understanding of various forms of personal debt

Correctly complete basic calculations involving interest payable and other financial information

Identify and evaluate debt management strategies

Demonstrate an understanding of the implications of poor management of personal debt
The following literacy learning outcomes are embedded in the assessment. By achieving the above
learning outcomes, tauira will also achieve these learning outcomes:

Write comprehensible sentences in response to questions

Solve multi-digit addition and subtraction problems

Demonstrate an understanding of terminology relating to personal debt and debt management

Correctly complete calculations involving addition, subtraction, multiplication, percentages and /
or fractions

Locate and identify information of relevance in programme materials
Tohutohu (Instructions)
Components of the Assessment
There are three parts to this assessment (‘Part A’, ‘Part B’ and ‘Part C’), each of which contain a number
of questions and tasks. You are to complete all three parts.
Response Format
You have a choice as to how you will complete this assessment. Your options are:
1. Use the softcopy template provided on iAkoranga then upload it to iAkoranga.
2. Complete on a computer in your own format, then upload it to iAkoranga.
Please note: Kaiako are unable to upload tauira work to iAkoranga on their behalf. Tauira must use
their own tauira account to upload any work to iAkoranga.
Presentation of Work
Your work should look tidy, be nicely set out and be well-written. Sentences need to be clear and
logical, grammatically correct, and easily understood by your kaiako. Also check through your work to
ensure spelling errors are minimal.
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Part A: Personal Debt Case Study
Aromatawai Hua Akomanga (Learning Outcomes Assessed)

Learning Outcome 1: Demonstrate an understanding of various forms of personal debt

Learning Outcome 2: Correctly complete basic calculations involving interest payable and other
financial information
Tohutohu (Instructions)
This part of the assessment contains a brief case study. You are to answer a series of questions relating
to this case study. The instructions for some questions will state that your responses must be
comprehensible. This means that any sentences you write are easy to understand and contain very
few (or no) grammatical or spelling errors.
Case Study: Waru and Lisa
Waru and Lisa have eight people living in their home. This includes themselves, Lisa’s mother, and their
four children (three teenage sons and one newborn daughter). It also includes their 13 year old niece
who lives with them during the school term as her parents live in a remote area, almost two hours
away from the nearest high school. Due to her health, Lisa’s mother is unable to work.
Usually, both Waru and Lisa work and earn good incomes. However, Lisa is currently on parental leave,
with the Government-funded payments being much lower than what she receives when working.
Furthermore, Lisa intends to stay on leave until their daughter is one year old, and will therefore not
receive any income at all for the majority of the year (as the Government only provides 18 weeks of
paid parental leave).
Unfortunately, the family’s fridge / freezer has broken down and needs to be replaced as soon as
possible. At present, Lisa is buying food daily from the supermarket as they cannot store items that
must be refrigerated or frozen. This is a very expensive option for the family – they cannot buy in bulk
to make use of special deals, and lots of leftovers are going to waste. Waru and Lisa had started an
emergency fund, but were only able to save $280 before their daughter was born. Given the size of
the family, they really need an extra-large fridge freezer. These cost $2,000.
Waru and Lisa have worked out that, due to their current situation, saving for a new fridge freezer is
not feasible. Under normal circumstances, with both partners working fulltime, they would be able to
save for a new fridge freezer one within five weeks. However, they currently cannot afford to pay $100
to $150 more in groceries every week, let alone save for a new appliance. The most they can afford to
put towards a new fridge freezer would be $20 per week until Lisa is working fulltime.
Waru and Lisa have identified the following forms of personal debt which could possibly be options:
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1. Hire Purchase with Store A: Store A is offering a deal whereby they could buy a fridge freezer over
a term of 36 months, with deferred repayments for six months and a six-month interest-free
period. An interest rate of 20% per annum would then apply. An establishment fee of $50 also
applies. The monthly payments would be $87.40 (inclusive of interest and fees). Penalties apply
for any payments made early.
2. Hire Purchase with Store B: Store B is also offering a hire purchase deal. However, it is only for 24
months and a higher interest rate (25% per annum) applies. On the positive side, the deferred
repayment and interest-free period is 12 months. The establishment fee for this deal is $75 and
the monthly payments would be $197.25 (inclusive of interest and fees). No penalties apply for
any payments made early.
3. Use their current credit card: Waru and Lisa have a credit card with a $5,000 limit. An interest rate
of 22% per annum applies. They have been very good with budgeting, and have only been using
the card for essential purchases such as groceries, car tyres, and basic clothing. They have been
paying the balance off in full each month.
4. Personal Loan: Waru and Lisa have looked on their bank’s website and seen that they offer
personal loans, with the minimum amount being $3,000. A one-off fee of $250 applies and the
interest rate is 19%. They called the bank and were told that they could choose the term of their
loan – anywhere from six months to five years, but they would need to start making repayments
immediately.
Tasks and Questions
Refer to the case study and the information in Kōnae Ako 3 about personal debt and complete the
following tasks / answer the following questions:
1. For each type of personal debt Waru and Lisa are considering, identify when they would actually
own the fridge freezer by ‘ticking’ the relevant column.
That is, if Waru and Lisa purchase a fridge freezer using hire purchase, would they own the fridge
freezer from the time they purchased it and signed the agreement, or the time they paid it off?
What about if they purchased the fridge freezer using their credit card or a personal loan?
An example of how to complete this task is given for you. Please note that ‘Personal Debt Method
‘X’’ is not a real type of personal debt and is not part of the case study.
Type of Personal Debt
Own at time of purchase
Example: Personal Debt Method ‘X’

Hire Purchase
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Credit Card
✔
Personal Loan
✔
Kaiako Comment
2. Both hire purchase options available to Waru and Lisa involve interest costs and an establishment
fee. One option also involves an early repayment fee. What is one other type of fee or expense
that often applies to hire purchase arrangements?
Sometimes compulsory insurance apply to hire purchase arrangements.
Kaiako Comment
3. If Waru and Lisa purchase a new fridge freezer using a hire purchase arrangement, they must be
given a ‘Disclosure Statement’. Identify whether each item of information listed in the following
table must be included in this disclosure statement.
Two examples of how to complete this task are given for you. For the first example, a ‘tick’ is shown
as this item of information must be included in a disclosure statement. However, for the second
example, no ‘tick’ is shown as this item of information is not necessary for a disclosure statement.
Must be included
in a disclosure
statement
Information
(tick if relevant)
Example 1: The amount they are borrowing

Example 2: The time of day they made the purchase
Their rights in regard to cancelling the agreement
✔
The colour or size of the item purchased
The bank account number, from which they will be making repayments
How often payments must be made
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The amount of each payment
✔
The total cost of credit, including all interest and fees
✔
At least one guarantor
The interest rate
✔
Their rights in regards to paying off the hire purchase early
✔
Kaiako Comment
4. Both hire purchase options available to Waru and Lisa offer a ‘deferred repayment’ period. What
does this mean?
Note: your answer must be written in at least one comprehensible sentence. It must also be written
in your own words. This means it cannot be copied from the programme resources.
Deferred repayment is a temporary agreement between lender and borrower
that borrower can postpone the repayment until a specific time they both
agreed.
Kaiako Comment
5. Waru and Lisa are considering using their credit card to purchase the fridge freezer. What is one
advantage that this method of personal debt offers over all three other options shown?
One advantage of using credit card is no contract and other paperwork involved
compared with all three other options.
Kaiako Comment
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6. What is one disadvantage to Waru and Lisa of using a credit card instead of one of the hire
purchase options?
Credit card require borrower to pay back a minimum amount every month and
there is no deferred payment period like hire purchase options.
Kaiako Comment
7. What is one disadvantage to Waru and Lisa of using a credit card instead of the personal loan
option?
The interest rate of credit card is higher than personal loan.
Kaiako Comment
8. Waru and Lisa are considering using a personal loan to purchase the fridge freezer. What are two
advantages that this method of personal debt offers over both of the hire purchase options?
The interest rate of personal loan is lower than hire purchase options.
Hire purchase options can only use for certain products, but personal loan can
use for a variety of products.
Kaiako Comment
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9. What is one disadvantage to Waru and Lisa of using the personal loan instead of any of the three
other personal debt options?
One disadvantage of using the personal loan is Waru and Lisa have to arrange
the repayment immediately,
Kaiako Comment
10. When Waru and Lisa called the bank to discuss the personal loan, they were told that a lower
interest rate of 13% may apply if they were able to provide a suitable form of security.
a. What is meant by the term ‘security’?
Note: your answer must be written in at least one comprehensible sentence. It must also be
written in your own words. This means it cannot be copied from the programme resources.
Security means that if Waru and Lisa can't make the required payment of
their loan, the lender can take the fridge freezer and sell it to some else to
get the money back.
Kaiako Comment
b. Why would a lender be willing to offer a lower interest rate if ‘security’ is provided?
Note: your answer must be written in at least one comprehensible sentence.
Some products hold better value, so the lender can see them quick and take
the money back easily if the borrower can't mange to make their repayments.
Kaiako Comment
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11. What is one other type of personal finance which may be available to Waru and Lisa to purchase a
fridge freezer? (That is, a type of personal finance other than hire purchase, a credit card or a
personal loan).
Waru and Lisa could extent their home loan and top up money to purchase a
fridge freezer, and this option has lower interest rate compare with other
personal finance.
Kaiako Comment
12. If Waru and Lisa chose Option 1 (the hire purchase with Store A), how much would they pay in:
a) interest and fees combined?
b) interest?
Working:
6 months x no repayment
Remaining 30 months x $87.4 = Total payments $2,622
Total payments $2,622 - Fridge cost $2,000 = Interest + Fees $622
- Fees $50
= Interest Only $572
Total Amount Paid in interest and fees (combined):622
Total amount paid in interest: 572
Kaiako Comment
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13. If Waru and Lisa chose Option 2 (the hire purchase with Store B), how much would they pay in:
a. interest and fees combined?
b. interest?
Working:
12 months x no repayment
Remaining 12 months x $197.25 = Total payments $2,367
Total payments $2,367 - Fridge cost $2,000 = Interest + Fees $367
- Fees $75
= Interest Only $292
Total Amount Paid in interest and fees (combined): 367
Total amount paid in interest: 292
Kaiako Comment
14. Which of the two hire purchase options would be best for Waru and Lisa? Give two reasons to
support your answer. Note: each reason must be written in at least one comprehensible sentence.
The best hire purchase option would be:
Option 1
■ Option 2
(Select the best option)
Reason 1:
Option 2 provides 12 months deferred repayment and interest free period which is
longer than option 1 only has 6 months.
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Reason 2:
Option 2 doesn't has any penalties apply for early repayments but option 1 does.
Kaiako Comment
15. Assume that Waru and Lisa have the $280 for their emergency fund in a savings account which
pays 3% interest per annum.
a) If simple interest applies, how much interest will the $280 earn over the 12 months?
$280 x 0.03 x 1 = $8.4
Kaiako Comment
b) If Waru and Lisa chose Option 2 (the hire purchase with Store B), and decided to use the money
in their emergency fund savings account to pay part of their debt at the end of the first 12
months, how much would they be able to pay off? This is equal to the original amount of the
fund plus the interest earned.
$280 + $8.4 = $288.4
Kaiako Comment
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c) If interest on the savings account is instead compounded monthly, what is the total amount
Waru and Lisa will be able to pay off their debt at the end of the first 12 months?
$280 x (1+0.03/12)^12 = $288.52
Kaiako Comment
d) If interest is compounded monthly, how much interest will the $280 earn over the 12 months?
$288.52 - $280 = $8.52
Kaiako Comment
16. Now assume that Waru and Lisa decided to choose Option 3 (the credit card). Also assume that:

They decided to use the $280 savings to contribute towards the purchase of the fridge freezer
immediately, and put the remaining $1,720 on the credit card.

They decided not to make any repayments for the first twelve months (that is, until after Lisa
returned to work).

In twelve months’ time, they will use Lisa’s first pay (from returning to work) to repay the
entire debt in one payment.
a) If simple interest applies, how much interest will be owing after 12 months? Recall that an
interest rate of 22% per annum applies to the credit card.
$1,720 x 0.22 x 1 = $378.4
Kaiako Comment
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b) If simple interest applies, what will be the total cost of the fridge freezer to Waru and Lisa?
Include the original purchase price and interest payable.
$1,720 + $378.4= $2,098.4
Kaiako Comment
17. Now assume that Waru and Lisa decided to choose Option 3 (the credit card), but that:

They pay the entire cost of the fridge freezer ($2,000) on their credit card.

They do not make any repayments for three years.
a) If simple interest applies, how much would Waru and Lisa owe in total after three years?
Include interest and principal amounts.
$2,000 x 0.22 x 3 = $1,320
$2,000 + $1,320 = $3,320
Kaiako Comment
b) If interest is compounded annually, how much would Waru and Lisa owe in total after three
years? Include interest and principal amounts.
$2,000 x (1 + 0.22)^3 = $3,631.70
Kaiako Comment
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c) How much extra interest would Waru and Lisa have to pay after three years if interest is
compounded annually compared to if a simple interest rate applied?
$1,631.70 - $1,320 = $311.7
Kaiako Comment
18. Use the ‘Rule of 72’ to show how long it would take for Waru and Lisa’s debt of $2,000 to double
if they use their credit card and do not make any repayments at all. Remember, an interest rate of
22% applies to their credit card.
72 / 22 = 3.27 years
Kaiako Comment
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Part B: Debt Management
Aromatawai Hua Akomanga (Learning Outcome Assessed)

Learning Outcome 3: Identify and evaluate debt management strategies
Tohutohu (Instructions)
This part of the assessment contains a case study. You are to answer a series of questions relating to
this case study. The instructions for some questions will state that your responses must be
comprehensible. This means that any sentences you write should be easy to understand and contain
very few (or no) grammatical or spelling errors.
Case Study: Kevin and Hera
Kevin and Hera both have very good incomes. Together, they earn $170,000 per year. The couple, who
have four school-age children, managed to save a 20% deposit to purchase a home for $360,000 last
year. They were particularly proud about the fact that they were able to do this without using any of
their KiwiSaver funds.
Although Kevin and Hera had been great at budgeting and managing their finances while saving for the
deposit on their home, they have not been as good since then. They celebrated the purchase of their
home by buying a large amount of homeware to make their house look good. Some of this was
purchased using a store card at a large department store, but most of it was put on one of the couple’s
two credit cards.
Then, after moving in, Kevin and Hera decided that they really did ‘need’ more furniture for the house.
This included a new lounge suite as the old one looked quite rugged in their beautiful new home,
outdoor furniture for their patio, and a larger dining suite. It also included a new bed and bedding for
the guest room – they had never had a guest room before, so did not own a ‘spare’ bed.
Kevin and Hera paid for these additional purchases using a range of consumer debt. Although they did
not revise their budget before making any of these purchases, they believed that they would be able
to afford it all since they were both on good incomes. Furthermore, since they had managed to save
$72,000 for their home deposit they figured they would definitely be able to pay off a few thousand
dollars of debt!
However, this ‘few thousand dollars of debt’ suddenly got a lot larger. Kevin and Hera decided they
really wanted a vehicle which was large enough for the family of six to travel in together, and that they
were not willing to wait any longer before getting one. They therefore purchased a seven-seater car
for $32,000. They were able to trade in one of their current two vehicles for $8,000, but then used
vehicle finance to pay the remaining $24,000.
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In the months following the purchase of their house, Kevin and Hera found it difficult to manage all of
their debt payments, especially since they also needed to meet their mortgage payments They used
automatic payments (set to come out of their bank account on ‘pay day’) to make sure they did not
miss any repayments, but at times this did not leave enough money in their bank account for the
weekly grocery shopping. Groceries were therefore purchased on their credit cards instead. Added to
the fact that the couple were still buying housewares on their credit cards, this made their credit card
debt climb very fast.
Hera knew that they were starting to ‘juggle’ their money and was nervous about her credit card
balances. When her youngest sister asked her to be a guarantor for her to buy a better car, Hera said
‘no’ straight away. Saying yes would have made her even more worried about her finances than she
already was – and Hera had a good reason to be worried. Since she has a habit of checking all mail,
emails and statements from each of their creditors as soon as they are received, Hera could see that
even the interest charged on her credit cards was getting higher each month (since she was only
making the minimum monthly payments).
After twelve months of juggling finances, matters got worse. Both of the hire purchase arrangements
they had entered into had offered a 12 month interest-free, deferred payment period, so they had not
bothered to make any payments towards this debt during the first year. It was now time to start making
payments.
It turns out these payments were much higher than either Kevin or Hera realised they would be. For
example, the term of their hire purchase for their lounge suite was 48 months. Since payment was not
required during the first twelve months, the couple knew they would be making monthly payments
for 36 months. However, since the lounge suite cost $8,800, they thought the payments would be
approximately $244 per month (calculated as $8,800 / 36 months). However, their bill shows that the
first monthly payment is now owing and it is $357. This is over $100 more every month!
Kevin and Hera work out that, if they pay $357 for 36 months, they will be paying a total of $12,852
for their lounge suite. Neither of them is very happy about this at all. At $8,800, they already knew
they were spending a bit much on a lounge suite. Had they realised it would cost them over $4,000
more in interest and fees, they would have chosen a cheaper lounge suite. In fact, now they are wishing
they just ‘made do’ with their old lounge suite.
The couple decided it was time they dealt with their debt problem. They started by writing a list
showing all the debt they owe. This included:

$285,500 on their mortgage (they had paid off $2,500), at a fixed interest rate of 5.9%.

$21,000 on their vehicle loan (they have paid off $3,000). They managed to get a relatively low
interest rate of 13% as the vehicle is used as security for the loan.

$8,850 for a hire purchase arrangement for a lounge suite (this includes a $50 establishment fee).
No payments have yet been made, and an interest rate of 26% applies.
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
$3,600 for a dining suite purchased on another hire purchase arrangement. Again no payments
have yet been made, and an interest rate of 29% applies.

$4,860 on their store card for a bed and homeware. The interest rate for this is 23.95%.

Credit card 1: $3,716. An interest rate of 24.99% applies.

Credit card 2: $7,420 (this card was used to pay for the outdoor furniture). An interest rate of
24.99% also applies to this card.
This comes to a grand total of $334,946. Of this, $49,446 relates to purchases other than their home.
Kevin and Hera are shocked. They had gone from a position of having $72,000 in savings to almost
$50,000 of debt for unnecessary items. As they review their list of debt, the couple realise that the
only purchase they do not regret is the purchase of their home.
Kevin and Hera are actually very glad they purchased their home at the time they did – in the year
since their purchase, property prices in their area have increased significantly. The couple has even
been approached by several real estate agents asking if they were willing to sell their house. Each of
these agents has told them their house would now sell for at least $400,000. Kevin and Hera love their
home and do not want to sell it. However, looking at their debt, they are wondering if they will have
to.
Questions
19. Even though Kevin and Hera are in a bad situation with their finances, there are some things that
the couple did do right when managing their debt. That is, some of their behaviour was positive.
Identify one of these positive actions.
An example of how to complete this question is given below. You cannot give the same answer –
you must identify something different that the couple did right.
Example
Hera did not agree to be a guarantor for her sister when she wanted to buy a better car.
Kevin and Hera use automatic payments for their mortgage payments to make sure
they did not miss any repayments.
Kaiako Comment
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20. Refer to the debt management mistakes given in Section 2.1.3 of Kōnae Ako 3, Magazine 1. Identify
two of these mistakes that Kevin and Hera have made when it comes to managing their debts.
Explain each answer by referring to information from the case study.
An example of how to complete this question is given below. You cannot give the same answer –
you must identify a different mistake.
Example
Mistake: Continuing to use credit cards
Explanation: The couple were continuing to buy homewares on their credit card, even though they
realised that they did not even have enough money some weeks to buy their groceries without using
debt.
Mistake 1:
Not understanding the fully loaded cost of debt
Kaiako Comment
Explanation:
With regards to their hire purchase for their lounge suite, they didn't understand the
fully loaded cost of debt. So the repayments is much higher than they expect. They
only focus on the original amount of debt when they signed the contract, instead of
what they need to pay later.
Kaiako Comment
Mistake 2:
Making debt decisions without a budget
Kaiako Comment
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Explanation:
Kevin and Hera didn't use a budget before make a debt decision. They just believed
that they could afford it because they were both on good incomes.
Kaiako Comment
21. Kevin and Hera do some research into debt consolidation loans. After contacting a number of
financial institutions, they believe they have found the best debt consolidation loan available. It
allows them to choose the period over which they will repay their debts and charges an interest
rate of 19%.
Kevin and Hera are thinking about using this loan to borrow $50,000 to repay all of their debts
(aside from their mortgage debt).
•
Is this a good idea?
Yes
■
No
(Select your response)
Explain your answer. Note: your answer must be written in at least one comprehensible sentence.
Debt consolidation means taking out a loan and using the money to pay off other debts, so
the borrower can focus on one repayment. However, it doesn't mean debt consolidation
needs to include all debts. They need to carefully consider what they will consolidate. For
example, $21,000 vehicle loan has low interest rate of 13%, which is lower than the debt
consolidation loans (19%). So the vehicle loan shouldn't include in the consolidation loan.
Kaiako Comment
22. Kevin and Hera find out that, if they repay their hire purchase for their dining suite early, an early
repayment fee of $100 will apply. Should the couple consider consolidating this debt?
Should the couple consider consolidating this debt?
Yes ■ No
(Select your response)
Explain your answer. Note: your answer must be written in at least one comprehensible sentence.
If they pay the dining suite early, they don't need to pay high interest 29%. If they choose
to consolidate this loan, the interest rate is 19%. The total they need to pay is $100(early
repayment fee) + $3,600 (dining suite)=$3,700. If they consider consolidating this debt,
the cost will be $3,600 x (1+19%)^1=4,284. Thus, consolidating this debt is much more
than $100 early repayment fee, and couple shouldn't consider consolidating this debt.
Kaiako
Comment
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23. Kevin and Hera would like to know if refinancing, using the increased value in the house, would be
a suitable debt management strategy.
Is refinancing likely to be suitable for Kevin and Hera?
■
Yes
No
(Select your response)
Explain your answer. Note: your answer must be written in at least one comprehensible sentence.
It will be a suitable debt management strategy if the couple refinancing their
home loan and pay off other debts. Because it has lower interests compare with
other debts, and it can extend the repayment time and also it becomes a fixed
rate loan and reduce risk.
Kaiako Comment
24. Another option Kevin and Hera consider is selling their new car. Vehicle prices decrease quite fast,
so they think they will only be able to get $26,000 for it. However, they think they would be able
to use some of this money to buy a much cheaper seven-seater vehicle (perhaps one for $10,000)
and then use the remaining $16,000 to help pay off the debts which have the highest interest rates.
Explain why Kevin and Hera may not be allowed to use this debt management strategy. Note: your
answer must be written in at least one comprehensible sentence.
The new car is used as the security for the loan. It means that if the loan is not
repaid, the lender can sell or take the car to pay off the loan. They can't sell the
car without permission from the finance company. Thus, the couple can't use
the money from selling the car to pay off other debts.
Kaiako Comment
25. Identify two other debt management strategies that may be available to Kevin and Hera (that is,
two strategies other than a debt consolidation loan, refinancing, or selling assets). Note that they
have already been told by a budget adviser that they are not experiencing ‘significant financial
hardship’ and that not all debt management strategies will be available to them.
Strategy 1:
The couple could use budgeting strategy by limiting their expenses to what they can
afford.
Kaiako Comment
K3A1
20
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Certificate in Money Management
Strategy 2:
A creditors' pool means that they also can find a third party such as budget adviser,
an accountant or a financial adviser help them to combining all debts and setting
regular repayments and refinancing.
Kaiako Comment
K3A1
21
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Te Tohu Whakahaere Pūtea
Certificate in Money Management
Part C: Poor Debt Management
Aromatawai Hua Akomanga (Learning Outcome Assessed)

Learning Outcome 4: Demonstrate an understanding of the implications of poor management of
personal debt
Tohutohu (Instructions)
This part of the assessment contains four questions and a task. The questions relate to two brief case
studies.
Questions
Case 1: Ben
Ben entered into two hire purchase agreements. At the time he did this he was earning a good income.
However, soon after the ‘deferred payment’ period ended, Ben was made redundant. He is trying his
best to find work and has sold off all unsecured assets and used the money to pay off his other debts.
However, he has no way of making the required payments for his two hire purchase agreements.
After two months of failing to make the required payments, his friend Jack told him that finance
companies have a legal obligation to consider allowing you to restructure your debt payments if a
borrower is experiencing ‘unforeseen hardship’.
26. In the case of Ben, the finance company is not required to consider restructuring his debt payments
on the grounds of ‘unforeseen hardship’. Why is this?
For the "unforeseen hardship", the borrower must not be behind in their payments for
two months or more. However, Ben has already failed to make two months repayments.
Kaiako Comment
27. What should Ben have done differently after losing his job?
Ben should contact his finance company immediately and let them know he lose his
job.
Kaiako Comment
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Case 2: Puawai
Puawai had a lot of debt a few years ago. Matters got so bad that she felt the only option available to
her was to enter into the No Assets Procedure. After spending the 12 months in this procedure, Puawai
did not have any debts.
Puawai learnt from her experience and started to live her life using a budget. At one stage she needed
to take on a small amount of debt to buy a washing machine, but she paid this off early and has paid
all of her other bills on time. Over a period of five years, Puawai even managed to save enough to make
a 20% deposit on her own home. Puawai was about to approach a lender to ask about a mortgage, but
her sister told her that she would be unlikely to get one because the lender would know she had been
in the No Assets Procedure.
Puawai was surprised because she was sure that the record of her being in the No Assets Procedure
would only stay on the Insolvency and Trustee Services website for four years, and it had now been
five years.
28. What is the most likely way a lender would find out about Puawai being in the No Assets Procedure
five years after it had finished?
The most likely way a lender would find out about Puawai being in the NAP is on
the Insolvency and Trustee Service website. The record will remain on the website
for four years and it may be noted on the credit file for up to seven years.
Kaiako Comment
29. New Zealand has a ‘comprehensive credit reporting regime’. What is one positive impact of this
for Puawai?
The CCR regime means that credit rating agencies can hold a lot of information for
everyone, not only just negative information. There are many positive information
there, such as good recent debt repayment history, paying bills on time and so on. It
helps Puawai to prove that she fixed the issue and have an excellent recent history.
Kaiako Comment
K3A1
23
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Certificate in Money Management
Question 30
The following table shows 13 possible implications of different insolvency and debt collection
procedures. These procedures include bankruptcy, repossession, mortgagee sales, and the no assets
procedure.
You are to identify which implications relate to each of these procedures. Do this by selecting the right
procedure for each implication and writing it in the table below. Note that some of these implications
relate to more than one procedure.
You are to identify:
• Eight (8) implications for Bankruptcy.
• Three (3) implications for Repossession.
• Five (5) implications for No Asset Procedure.
• Four (4) implications for Mortgagee Sales.
Number
Implication
Procedure
(Select from: Bankruptcy,
Repossession, Mortgagee Sales, No
Asset Procedure)
K3A1
1
Example: Your home is likely to be taken and
sold
2
You cannot apply for credit of more than
$1,000 without letting the lender know about
the insolvency position you are in
3
Your IRD number will be cancelled and a new Bankruptcy, NAP
one issued
4
You may still owe money to a lender who you Repossession, NAP, Mortgagee
had secured debt with afterwards
sales
5
You cannot leave New Zealand without Bankruptcy
getting permission
6
Phone and power companies may decide to Bankruptcy, NAP
close your account
7
Only the asset(s) given as security can be Repossession, Mortgagee sales
taken and sold
8
You are not allowed to run a business for Bankruptcy
three years without getting permission
24
Mortgagee Sales
Bankruptcy
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K3A1
9
You will receive a Property Law Act Notice Mortgagee sales
letting you know how much you owe and
giving you at least 20 days to pay this
10
You will be required to complete a ‘means’ NAP
test which shows you have no way of paying
for your debts
11
Valuable assets (including expensive cars) Bankruptcy
may be taken and sold to pay debts, even if
they are unsecured
12
Someone else will manage your finances for Bankruptcy
three years
13
Your credit rating is likely to be affected
25
Bankruptcy, Repossession, NAP, Mortgagee sales
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CMM K3A1 Evidence Checklist
Check that all parts of your assessment is completed.
Evidence Requirement
PART A: Personal Debt Case Study
Ticks placed in relevant columns of the table.
Fee or expense identified for HP.
All items included in disclosure statement is identified.
Deferred payment definition is given.
ONE advantage of credit card is given.
ONE disadvantage of credit card over HP is given.
ONE disadvantage of credit card over Personal loan is given.
TWO advantages of personal loan over HP.
ONE disadvantage of using personal loan is provided.
Meaning of security is provided.
Reason for having lower interest rate if security is provided is
given.
Ques 11
Another type of personal finance available is provided.
Calculation and amount for total and interest is given for Option
Ques 12
1
Ques 13
Calculation and amount for total and interest is given for Option
2
TWO reasons provided for the best option.
Ques 14
Ques 15
Calculations for parts a, b, c & d are provided.
Calculations for parts a & b are provided.
Ques 16
Ques 17
Calculations for parts a, b & c are provided.
Amount for loan to double is provided using rule 72.
Ques 18
PART B: Debt Management
Ques 19
ONE positive behaviour for Kevin and Hera is given.
Ques
Ques
Ques
Ques
Ques
Ques
Ques
Ques
Ques
Ques
Ques
1
2
3
4
5
6
7
8
9
10a
10b
Ques 20
TWO mistakes are identified and explanation for each is
provided
Ques 21
Yes / No is selected and explanation is given.
Ques 22
Yes / No is selected and explanation is given.
Ques 23
Yes / No is selected and explanation is given
Ques 24
Explanation provided.
Ques 25
TWO Debt management strategies provided.
PART C: Poor Debt Management
Ques 26
Explanation provided
Ques 27
Answer provided.
Ques 28
Answer provided.
Ques 29
ONE Positive impact of comprehensive credit reporting is given
for Puawai.
Implications for different types of insolvency and debt collection
procedure are provided.
Ques 30
K3A1
Tick
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
26
✔
✔
Version 2.0
Wātaka Whakahoki Māka (Marking Schedule)
PART A: Personal Debt Case Study
• Learning Outcome 1: Demonstrate an understanding of various forms of personal debt.
• Learning Outcome 2: Correctly complete basic calculations involving interest payable
and other financial information
All items in the table below relate to Part A of this assessment.
Achieved /
Item
No.
LO
Evidence Statements
/Ques
1
LO1/
Q1
Understanding of ownership
of assets purchased with
personal debt is
demonstrated.
2
LO1/
Q2
A relevant type of fee or expense
Understanding of hire
purchase as a form of personal is identified.
debt is demonstrated
3
LO1/
Q3
At least 7 of the 9 items of
Understanding of hire
purchase as a form of personal information are correctly
identified as being required (or
debt is demonstrated.
not required) within a disclosure
statement.
4
LO1/
Q4

Understanding of hire
purchase as a form of personal
debt is demonstrated.

Judgement Statements
The correct time of ownership
has been identified for all three
types of personal debt.
The term ‘deferred
repayment’ is correctly
explained.
The response is given in the
tauira’s own words and is
written in at least one
comprehensible sentence.
5
LO1/
Q5
Understanding of hire
One advantage of using the
purchase as a form of personal credit card is correctly identified.
debt is demonstrated.
6
LO1/
Q6 &
Q7
Advantages and disadvantages
of various forms and options
of personal debt are correctly
identified
One disadvantage of using the
credit card is correctly identified
for either Question 6 or Question
7.
Yet to
Achieve
Te Tohu Whakahaere Pūtea
Certificate in Money Management
7
LO1/
Q8
Advantages and disadvantages
of various forms and options
of personal debt are correctly
identified
Two advantages of using the
personal loan are correctly
identified.
8
LO1/
Q9
Advantages and disadvantages
of various forms and options
of personal debt are correctly
identified.
One disadvantage of using the
personal loan is correctly
identified.
9
LO1/
Q10
Understanding of the term
‘security’ is demonstrated.

The term ‘security’ is
correctly explained for
Question 10(a).

The response for Question
10(a) is given in the tauira’s
own words.

A correct explanation is given
for Question 10(b).

Each explanation is given in
at least one comprehensible
sentence.
10
LO1/
Q11
A relevant form of personal
finance is identified.
The form of personal finance
differs from those given within
the case study.
11
LO2/
Q12
&
Q13
Interest and fees are correctly
calculated based on
information provided.

The combined total of
interest and fees is correctly
calculated for Questions
12(a) and 13(a).

The amount of interest is
correctly calculated for
Questions 12(b) and 13(b).

The correct option is
identified.

Two relevant reasons are
given.

Each reason is given in at
least one comprehensible
sentence.
12
K3A1
LO1/
Q14
The best hire purchase option
is identified and explained.
2
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13
14
15
16
LO2/
Q15
&
Q16
Simple interest calculations
are correctly completed (for
Questions 15(a), 15(b), 16(a)
and 16(b)).

The amount of interest is
correctly calculated for either
Question 15(a) or 16(a).

The correct response is
calculated for either
Question 15(b) or 16(b).
LO2/
Q15
Compound interest
calculations are correctly
completed (for Questions
15(c) and (d)).

The correct response is
calculated for Question 15(c).

The amount of interest is
correctly calculated for
Question 15(d).
Calculations relating to both
simple interest and compound
interest, and the difference
between them, are correctly
completed.

The correct total is calculated
for Question 17(a).

The correct total is calculated
for Question 17(b).

The correct amount is
calculated for Question 17(c).
The Rule of 72 is correctly
used (for Question 18).

The correct amount of time is
calculated.
LO2/
Q17
LO2/
Q18
Comments
To achieve Learning Outcome 1, tauira must fulfill all of the requirements for Questions 1 -11 plus
Question 14.
Learning Outcome 1: Demonstrate an understanding of various forms of personal debt
Otinga (Result)
K3A1
Achieved / YTA
3
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To achieve Learning Outcome 2, tauira must fulfill the requirements for at least four from Questions 12
-18 (Items 11, 13 – 16).
Learning Outcome 2: Correctly complete basic calculations involving interest payable and
other financial information
Otinga (Result)
Achieved / YTA
PART B: Debt Management
• Learning Outcome 3: Identify and evaluate debt management strategies
Item
No.
LO /
Ques
1
LO3/
Q19 &
Q20
2
K3A1
LO3/
Q21
Achieved /
Evidence Statements
Judgement Statements
Positive and negative
behaviour relating to
debt management is
identified.

A positive action relating to debt
management is identified for
Question 19.

Two mistakes are correctly
identified for Question 20.

Mistakes match those given in
Section 2.1.3 of Kōnae Ako 3,
Magazine 1.

Correct explanations are given
for each mistake.

All responses are relevant to the
case study.

It is correctly identified as to
whether the strategy is a good
idea.

A relevant explanation is given
to support the response to.

Explanations are given in
comprehensible sentences.
An option of using a
debt consolidation loan
as a debt management
strategy is evaluated for
a case study scenario .
4
Yet to
Achieve
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3
4
5
6
LO3/
Q22
LO3/
Q23
LO3/
Q24
LO3/
Q25
An option of using a
debt consolidation loan
as a debt management
strategy is evaluated for
a case study scenario.
The option of
refinancing as a debt
management strategy is
evaluated for a case
study scenario.
The option of selling an
asset as a debt
management strategy is
evaluated for a case
study scenario.
Debt management
strategies are identified.

It is correctly identified as to
whether the couple should
consider consolidating the debt .

A relevant explanation is given
to support the response to.

Explanations are given in
comprehensible sentences.

It is correctly identified as to
whether refinancing is likely to
be suitable.

A relevant explanation is given
to support the response.

The explanation is given in a
comprehensible sentence.

A correct and relevant
explanation is given.

The explanation is given in a
comprehensible sentence.

Two relevant debt management
strategies are identified.

Strategies are different to those
mentioned in the assessment
(i.e. they do not include debt
consolidation, refinancing, or
selling assets).
To achieve this learning outcome, tauira must fulfill at least FIVE of the requirements outlined above.
Comments
Learning Outcome 3: Identify and evaluate debt management strategies
Otinga (Result)
K3A1
Achieved / YTA
5
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PART C: Poor Debt Management
• Learning Outcome 4: Demonstrate an understanding of the implications of poor
management of personal debt
Achieved /
Item
No.
LO/ Ques
Evidence Statements
Judgement Statements
1
LO4 /
Questions relating to
implications of poor debt
management are
answered correctly.

Correct responses are given
to at least three of the
following four questions
(Q26 – Q29)

Responses are relevant to
the cases provided.

At least 6 of the 8
implications of bankruptcy
are correctly identified.

At least 2 of the 3
implications of repossession
are correctly identified.

At least 4 of the 5
implications of the No Assets
Procedure are correctly
identified.
Q26 to
Q29
2
LO4/
Q30
The implications of
various insolvency and
debt collection
procedures are identified.
Yet to
Achieve
At least 3 of the 4
implications of mortgagee
sales are correctly identified.
To achieve this learning outcome, tauira must fulfill both of the requirements outlined above.

Comments
Learning Outcome 4: Demonstrate an understanding of the implications of poor
management of personal debt
Otinga (Result)
K3A1
Achieved / YTA
6
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