A Short Guide to Arranging Cash in Emergency Scenarios

By  //  September 27, 2019

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We’ve all been there, more times than we’d like, when an unforeseen expense comes up, only to find our bank account balance not ready to comply with our wishes.

We’ve all been there, more times than we’d like, when an unforeseen expense comes up, only to find our bank account balance not ready to comply with our wishes.

You are falling short on cash and are now frantically trying to come up with ways to fulfill the shortage and regain normality in your finances.

While this scenario is far from ideal for most people, there is no doubt that we are all susceptible to such situations, after all, life can be surprising and unpredictable. 

Anyone, regardless of their financial skills and planning, can be faced with a situation where time is short and one has to arrange emergency funds.

If you are a good planner, chances are you have been setting aside money for a rainy day, a savings account or some kind of insurance that you would cash out in such emergencies.

But what if you don’t want to touch that money? As you know your long term financial gain will suffer because of short term issues, you might not even wanna disturb your savings. And in the case that you do not have any savings, well, then you better read on till the end.

First off, it is perfectly alright to find yourself in such a situation. Some people find it embarrassing and awkward, to say the least, asking family or friends in times of need.

There is no reason that you should feel this way. While better financial planning and saving for days like this is a great idea, it does not guarantee that you won’t come across this again. Think about it, if entire countries, corporations, and organizations can get themselves into financial crisis, why can’t you? And if they can get out, so can you.

So before we get into the professional services that can help you out, let’s talk about what other options you have in times like these.

Now, let’s discuss the most common reasons that people need short term emergency loans. 

Weddings and Funerals

One of the most common reasons by far, for drawing short term loans is to pay for significant events in one’s life. Such as a wedding that went overbudget (or is going to go over budget), or a funeral that you weren’t prepared for. 

Schools and University Fees

Have you got outstanding academic dues for your children? Are you falling short on the college or university fees? 

Holidays and Vacations

So it been a while since you and your family went on a holiday. Well, a family holiday also usually means a massive expenditure. Chances are that despite your savings for the vacation, you might need additional input for expenses

Home Moving or Remodeling

Another common reason why people need emergency cash is when they are remodeling and renovating the house. Even moving a house from one location to the other can warrant extra money that you hadn’t initially planned for.

Pay off Credit Cards

On the surface, it looks surprising to get into more debt to pay off your credit card debt but if you dig deeper, it starts to make sense. You will be charged exorbitant amounts in late fees and interests, so sometimes people get short term cash to save up on the fees and interest rates and pay off their outstanding credit card debt.

Medical Bills

Another big one. Medical bills have a way of piling up and sneaking up on you and if the bill is a result of an accident, this will affect your finances badly. Sometimes, even after insurance coverage, there are associated expenses with medical conditions that are not compensated for within the insurance policy and you’ll need some kind of emergency coverage.

Buying a Car

Maybe it is time to get rid of your old traveling companion and to get a brand new car. Maybe you just want to buy an RV and fulfill your lifelong passion for countrywide travel, you’re gonna need extra cash on top of your regular income to finance it.

To Start a Small Business

Do you have a small business idea that you’ve always wanted to pursue? Many people opt for loans to pursue their passion projects or kickstart their start-ups while working full-time jobs to pay the bills. If you’ve done your basic business planning and know your numbers, it may be a good idea discussing it with your lender to get the ball rolling on your side business.

Miscellaneous

There may be any number of reasons why you need the loan and we’ve only tried to list the most common ones. The idea is that it is absolutely normal and manageable if you are smart about it and don’t rush any financial decisions without doing your due diligence.

What are the Options?

Before we go into the professional options for the arrangement of funds, let’s talk about what you can do on your own. But if you truly want a risk-free and professional service, you can skip this section and jump right into the section for professional options for loans in New Zealand and the world over.

Collect your debt:

Are there any loans that you’ve given out to family and friends? Any acquaintances who owe you money? Since you find yourself in need now, it may be a great idea to give them a call first and ask for repayment.

For some people, even asking for their own money back, is an embarrassment. Do not hesitate to ask for it. Not only is it your own money, this is the most risk-free option when collecting funds and doesn’t involve paying any interest or even repayments.

Phone a Friend:

This is the second favorite option. Don’t be embarrassed by calling in a favor and ask your close friends and relatives, if they’ll be willing to help out. If you’ve been a kind and caring person, there shouldn’t be any problems and your friends would be more than willing to help. All you have to do is ask.

How to Get a Loan from a professional Lender

These days, there is a variety of professional services to choose from. There is a number of financial services offering loans that are tailored to your needs and your ability to repay.

Generally referred to as ‘Personal Loans’ they take into account your credit history, your financial situation and how much time you need to repay. We’ll discuss the different types of personal loans in detail, so you can have an understanding of the options out there to choose from.

A professional lending network offers the following options

  • Secured Loans
  • Unsecured Loans
  • Fixed Interest Loans
  • Line of Credit
  • Payday Loans
  • Overdraft

Secured loan

A secured loan is when you provide an asset as collateral which the provider is liable to obtain if you fail to pay back. Mortgage and Car loans are secured loans. If you are looking to obtain a small amount, you can put items like jewelry and other valuables as collateral.

Unsecured Loan

An unsecured loan is such when there is no collateral provided and the lender is not legally liable to any assets in case of default. These are the most common forms of loans taken out by regular people and depend solely on the credit history and financial background checks of the person as a form of security. 

Borrowing money from family and friends can also be considered an unsecured loan since it is based on your relationship and history with them. 

Fixed Interest Loans

A more long term solution, fixed-interest loans are usually on your mortgage and cars. The term is between 10 to 30 years where the interest rate remains the same for the entire term. The monthly capital and repayment interest rate do not change for the life of the policy.

Variable Interest Loans

These types of loans rely on the borrower’s financial situation and the interest rate varies, upwards or downwards, depending on the conditions and is reflected in your monthly payments accordingly.

The starting rate for variable interest loans is usually lower than a fixed-rate loan. If the rate increases over-time, you can pay off early before the term and not be liable to any penalties, provided this is included in the contract.

Line of Credit

A line of credit is a permanent ability to draw credit provided by a bank to the borrower. It has a ceiling cap and is limited as per the contract but it provides a borrower a constant ability to draw and repay, within the limits set by the bank. 

There is no limit to the amount of time you can withdraw and repay and if the limit is reached, your line of credit continues with repayment without any further contracts or intimations with the bank.

Payday Loans NZ

Usually provided by private companies, payday loans are simple, short term loans provided on the basis of your current salary. You can get anywhere from 30% to 50% of your salary for a term date based on when you get your next salary.

You will have to provide proof of regular income, a bank account, and your address. You can provide a post-dated check or set up an online bank authorization for repayment.

Your provider will lay out the costs, fees, interest rates and a repayment schedule for you. 

There many providers of payday loans in New Zealand, designed to provide cash for short-term and emergency scenarios. If going to friends and family is not an option, payday loans are usually a lifesaver. However, always do your due diligence and be aware of all costs and fees associated with it.

Over Draft

Another interesting way for short term cash is the ability to ‘Overdraw’ from your bank account. This is when you do not have enough cash in your account to cover a certain payment or transaction, and the bank pays on your behalf. Since it’s not your money, it is credit and is subject to overdraft fees and regulations.

The amount that you can overdraw your account and the interests you pay are pre-decided in your account contract and can be changed if you decide to increase or decrease your account overdrawn limits.

Debt Consolidation Loan

Although not a solution for short term needs, we’d like to mention debt consolidation loans for those who have accumulated different kinds of debt over time. Whether it’s your student loans or multiple credit card loans, a debt consolidation loan is when you combine all your loans into one and payback to one provider instead of all of them.

This usually lowers the interest rate and makes it easy for you to manage all your finances and repayments.

Conclusion

In the end, it is important to conclude that no matter our jobs and our financial conditions, everyone is bound to find themselves in a financial urgency at one point in their life or another. Hopefully, if you’ve read this far, you have a deeper understanding of the kind of borrowing options out there but also which one is right for you.

If it is a short term scenario and you don’t want to get into hefty interest rates then look for family and friends first. This option is absolutely viable when the amount you need is a small one.

Even for large amounts, firstly, you should look for the recollection of your own lending from friends, but if that isn’t an option, there is a world of professional lenders in NZ who can help you out.

Always do your due diligence and calculate total costs. Do not overestimate your ability to repay and do not forget, there can be other urgencies along the way. Getting a short-term loan in New Zealand is far easier than it used to be and the whole process can happen, from application to getting the credit in your account, in an hour. 

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