A growing number of resources are available if you’re struggling to keep up with bills and expenses amid New Zealand’s response to the coronavirus pandemic. Explore several credit options or banks reaching out to offer assistance. You might even find help from your employer or through government resources.
Four ways to cover your bills
If you’re thinking of borrowing, these types of credit might make the most sense. Generally, you still need to be employed for most of these options — or have another source of steady income.
1. New credit card
- Best for covering groceries and other essentials, for those with good credit
Many new credit cards come with a 0% promotional APR that can last from 6 to 18 months — and sometimes as long as 21 months, which gives you time to rack up and pay off a balance before the interest adds up.
However, you need good credit to qualify and it won’t be as useful for costs you need to cover with cash. Plus, if you can’t pay off your balance before the introductory rate finishes, you are stuck with higher interest rates than you find with a loan.
Compare credit cards
2. A personal line of credit
- Best for paying rent and other bills
A line of credit personal loan gives you access to cash that you can draw from as needed. There’s a cap on how much you can borrow, and you can typically make repayments in instalments over a few years. Some lenders require a minimum monthly repayment. Interest rates generally start around 4% and can go as high as 30% APR, and once you apply you can access your credit line as soon as the next day in some cases.
A line of credit can be helpful if you think your work hours may be reduced or you may be temporarily laid off. Typically, you need to have a steady source of income to qualify, and you have the most options if you have good credit.
3. A local bank or credit union loan
- Best for borrowing less than $1,000 in cash
Some local banks and credit unions offer small-dollar loans to borrowers with bad credit or low income. These are designed as a more affordable alternative to payday loans, though rates are higher than you find with a personal line of credit. It might take several days to receive your funds, and these loans aren’t available at all local banks.
Compare personal loans
4. Short-term loan
- Best as a last resort — while you still have job security
Short-term loans, like payday or instalment loans, can help if you have bad credit, bills to pay and have exhausted all other options. You can borrow between $100 and $10,000, sometimes on the same day you apply. Most short-term lenders only require you to have a steady source of income.
However, APRs are high and there’s a high risk of becoming trapped in a cycle of debt. If you think you might lose your job, look elsewhere. This option could land you in a worse financial situation than when you started.
Consider your payday loan options
Banks that offer coronavirus financial aid
Taking out new types of credit isn’t much of an option if you’re out of a job indefinitely. However, New Zealand’s major financial institutions are helping customers ease the financial impact of the new coronavirus. Below is a list of banks offering financial assistance to customers.
What is forbearance?
Forbearance is a hardship solution that allows you to pause your credit card or loan repayments without facing penalties or damage to your credit score. However, it should be used as a last resort, because interest continues to add up while you’re in forbearance.
Lenders typically add the interest that accumulates during forbearance to your balance, meaning you pay interest on interest. Also, you often don’t receive an extension on your term, resulting in higher monthly repayments.
Consider the following resources if your job, child care or another aspect of your finances has taken a hit since the coronavirus outbreak:
- Employer assistance. The government is also offering a Wage Subsidy to help employers pay staff.
- Emergency financial assistance. If you’re struggling to support yourself or your family, WINZ may be able to help with costs.
- Food banks. City Missions in Auckland, Wellington and Christchurch, as well as the Salvation Army, are putting emergency plans in place to cope with an increase in demand for services over the coming months.
- Your creditors. Even if your creditors aren’t advertising financial assistance, they still might be willing to work with you if you think you might miss a payment or two.