Financial support and borrowing money

Financial support

If you’re not studying, in training, or working, you may need financial support to get you through. Depending on your situation, there are options for financial support through Work and Income (WINZ). Some situations include having to move out of home or working fewer than 30 hours a week.

Some examples of support include Jobseeker Support or support for living expenses from WINZ. There’s also financial aid information available on the Ministry of Social Development website.

If you’re pregnant or have a child, you may be eligible for specific kinds of support from Work and Income New Zealand.

Borrowing from banks and lenders

Banks and lenders generally offer a few different types of credit, and it’s worth researching what option is right for you. Below are some of the main types of credit:

Credit cards are essentially a short-term loan scheme. You’ll be able to spend whatever you want on a credit card account up to an agreed limit, and you’ll have to pay back what you’ve spent. If this payment isn’t done in time, you’ll have to pay additional interest which can be very expensive.

These allow you to spend more money than you have in your account up to a pre-set limit. They can be helpful but be careful about staying in debt. Overdrafts can have confusing interest rates and because you don’t receive a monthly bill, you might not realise how much interest you’re paying.

These are usually smaller loans available from banks, credit unions, peer-to-peer and payday lenders. Because they often have lower interest rates, they can be a good first option if your whānau or friend are unable to help. Banks, credit unions, and building societies often offer lower interest rates, so it’s best to look into these options first.

Buy now, pay later is a payment scheme that involves you paying an agreed amount for an item, and a BNPL company paying the rest. You then owe the BNPL company the rest and make regular payments. Some common BNPL options include Afterpay and Layby.

BNPL does not involve fees or interest, but don’t go overboard with using it! This can end up being hard to juggle and you can be charged late fees. Get more information on BNPL on the Sorted website.

You’ll always have to go through an application and approval process when borrowing money. This process will check your income, living costs and credit score, among other things. You can get more information about credit reports and your score on the New Zealand Government website.

Mortagages (or Home Loans) are larger, long-term loans used to pay for a house or property. There are many types of mortgages, with different fees, interest rates and flexibility. The Sorted website has a good summary of the different types, and the pros and cons of each.

Understanding interest rates

When taking out any loan, be aware of interest rates, terms and conditions and any fees — including fees that will be charged for starting the loan or paying it off early.

Sorted’s Debt Calculator can give you an idea of how much a loan will cost even before you apply, but keep in mind that some lenders charge interest in different ways.

This is important because higher interest rates and fees can escalate the cost of a loan and how much you eventually pay back. For example:

Borrowing $1,000 with an interest rate of 25% for 36 months will eventually cost you $1,431.
Borrowing $1,000 with an interest rate of 15% will eventually cost you $1,248.

Good and bad debt

There is good debt and bad debt. Good debt can improve your financial future or create long-term income, like a Student Loan. This is because Student Loans make tertiary study and upskilling possible, which improves chances for earning a higher income.

Bad debt is spending money on things that will lose their value and won't improve your income or financial position. An example of bad debt is a borrowing money for a phone that will quickly become outdated or damaged.

Getting help

Sometimes debt can become too much and you miss repayments. If you are finding your finances hard to manage, talk to the organisation you've got your loan from about your options. A conversation can sometimes result in a more manageable repayment schedule.

You can also get help with finances and budgeting. MoneyTalks is a free and confidential helpline available to provide advice to individuals and whānau.

Financial support and borrowing money