It’s no surprise when you see the statistics of how many people have bad credit. The global economy is not flourishing the way it used to, and well-paying jobs are scarce. In fact, the majority of people live from paycheck to paycheck and are one unexpected, emergency expense away from needing financial assistance. And if you have bad credit, your borrowing options are limited – but you can still apply for bad credit loans NZ with a private lender.
Why Bad Credit Affects Your Ability To Borrow
Traditional banking institutions use your credit score to gauge whether they can lend you money or not. Consider a loan from the bank as if they’re investing in you. They’re spending money on you, and you’re paying it back with interest. They have to trust that their investment will pan out, which is why they need to be sure about your ability to repay a loan they provide. However, with poor credit, your chances of getting a loan at a bank are slim.
Your credit score is determined by whether you’re a good payer or not. That means that if it shows that you have repaid previously debts in full and on time, every time, you’ll have a good score. With a good score, you’re considered a low-risk investment, because the chances of you defaulting on a payment are low. However, if you’ve defaulted on payments in the past, it reflects on your credit record, and progressively worsens your score the more often you miss a payment. Unfortunately, banks don’t provide loans to people with bad credit.
Your only other option is to approach a private lender in NZ for a bad credit loan. Here’s how:
Collateral is one of the best ways to get a bad credit loan approved. Although private lenders approve bad credit loans all the time – all you need is proof that you have a regular income which covers the repayment costs – but collateral always looks good, and increases your chances of approval. Some private lenders are even comfortable with increasing how much they can lend you if they trust that your collateral will cover the repayments in full.
Collateral is something of a high value that can be used in lieu of payment if you can’t afford to pay back a loan. For example, you could put your house, car, boat, or valuable jewellery down as collateral, which will improve your chances of getting a bad credit loan.
When you offer up these items of high value, it tells your lender that you’re serious about getting a loan with them. Besides, you’d much rather pay back a small, short-term loan than lose your house, right? It also tells them that you won’t turn back on your obligation to repay their loan, making you a more trustworthy investment.
Seek A Guarantor
A guarantor is a person who is willing to sign surety for you. Ideally, the person you choose should have a good credit score and should be in better financial standing than you are. The point of getting a guarantor is if that you can’t pay back the bad credit loan. If that happens, your guarantor has signed the contract agreeing to take your debt on as their own.
In other words, they’ll make the repayments for you in case you can’t. Why don’t they just lend you the money, you might ask? Borrowing money from a loved one is difficult. Most people don’t like to ask, and it risks their relationship if they can’t repay the loan.
And although cash advances are small amounts of money and short-term, a guarantor might not have access to the funds immediately – especially if you’re in an emergency. They might also be confident in your ability to pay back your loan while being there to act as a safety net if you need them to be. Having a guarantor tells your private NZ lender that even if you can’t repay the loan yourself, they will still get their money – it’ll just be paid by another person.
Even though you’re responsible with your finances, you could still find yourself strapped for cash at one point or another. Whether you had an unexpected expense pop up, or you’re in an emergency and need money urgently, being short of funds is a common complaint. Fortunately, you can apply for loans in NZ, even if you have bad credit! Talk to Cash Relief for more information on their bad credit loans – they have a financial lifeline for you when you need it most.