When Does Borrowing Increase Your Risk?
If you have been declined, it usually means lenders see a gap in your budget. Trying to force a loan into that gap can be dangerous if:
- You are borrowing for essentials: Using debt to pay for food or rent is a short-term fix that creates a long-term disaster.
- You are paying off other debt: Taking a high-interest loan to pay a lower-interest debt (like a utility bill) makes your financial hole deeper.
Instead of looking for more debt, look for support.
1. Interest-Free & Non-Profit Loans
Did you know there are loans in NZ with zero interest? These should always be your first stop.
Good Shepherd NZ (Good Loans)
This is a non-profit organisation that offers “No Interest Loans” (NILS) up to $2,000 for essential items (like car repairs, medical costs, or appliances). There are no fees and no interest.
- Who is it for? People on limited incomes who can afford small repayments but can’t get bank credit.
- How to apply: You apply through a community provider like the Salvation Army or Aviva.
Work and Income (Recoverable Assistance)
If you have an urgent cost, Work and Income may lend you the money interest-free. You pay it back slowly from your benefit or wages.
Pro Tip: You do not necessarily need to be on a benefit to qualify for some hardship assistance. Check your eligibility on the MyMSD website.
2. Negotiating Your Current Bills
Before borrowing cash to pay a bill, try to reduce the bill itself.
Utilities (Power & Internet)
NZ power companies have a legal obligation under the “Consumer Care Guidelines” to help customers in hardship. Call them and ask for:
- SmoothPay: Spreads your payments evenly throughout the year so winter bills don’t shock you.
- Payment Deferral: Asking for an extra 2 weeks to pay is often granted instantly and costs nothing.
Rent Arrears
If you are behind on rent, talk to your landlord immediately. Offering a small regular repayment (e.g., $10 extra a week) is often better for them than evicting you.
3. Free Financial Mentoring (MoneyTalks)
If you feel overwhelmed, you don’t have to face it alone. MoneyTalks (0800 345 123) is a free, confidential helpline in NZ.
They can connect you with a financial mentor who can:
- Talk to debt collectors on your behalf (they often get better results than you can alone).
- Help you access food parcels to free up cash for other bills.
- Review your budget to find “hidden” money.
The 7-Day Stabilisation Plan
Stop the panic. Follow this plan to stabilise your finances without a new loan:
Day 1: Call MoneyTalks or visit a local Budget Advisory Service.
Day 2: Check MyMSD for food grants or recoverable assistance eligibility.
Day 3: Call your power/internet company to set up a payment plan.
Days 4-7: Look for items to sell on Trade Me or Facebook Marketplace for immediate cash flow.
Conclusion: A “No” Can Be a New Start
Being declined for a bad credit loan feels like a failure, but it is often a safety mechanism protecting you from unmanageable debt.
By using resources like Good Shepherd’s no-interest loans or WINZ support, you can solve your immediate problem without sacrificing your financial future to high-interest lenders.
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