Understanding Hardship Loans And How To Obtain One

"Understanding Hardship Loans And How To Obtain One"

If you are having financial difficulties or an unforeseen expense in your life, you may want to consider an emergency hardship loan, this is especially true if you have poor or bad credit. 

Understanding Hardship Loans 

A hardship loan is a loan that is offered to help individuals pay for emergency or unexpected expenses that you are unable to pay for. 

Hardship loans are not an actual loan, but the underlying description of why the loan is needed, which in this case is for personal hardship. These loans are available in several different forms such as payday loans, short-term loans and 401(k) loans.  

In many cases, hardship loans come with high risk and high interest. The vast majority of lenders will offer hardship loans to individuals with bad credit who have no other option in terms of borrowing money in times of need. 

Five Types Of Hardship Loans 

Government Hardship Loans 

The New Zealand Government will offer assistance to individuals and families who are qualified for various expenses such as home energy bills, telephone service, medical bills and prescription drug costs. 

One should understand that this is typically not a loan and is considered more government assistance. The New Zealand government will not provide cash hardship loans to families or individuals, there are only able to offer various assistance programs for those in need. 

If you should receive energy bills that are higher than expected you may qualify for support, the government has various programs in effect to provide for those meeting certain qualifications. 

Hardship Personal Loans 

Short-term loans 

A short-term loan is classified as any type of cash advance that will typically need to be repaid within a matter of months. A short-term hardship loan is designed to help individuals address those immediate financial concerns. They provide individuals with the ability to repay the loan on the individuals next paycheck or in some circumstances at the start of a new job. 

Payday Loans 

A payday loan is very similar to a short-term loan, however, in this case, the repayment is designed around the individuals next paycheck. These loans are designed to help individuals pay for bills or any other expense until their next paycheck. 

Installment Loans 

Installment loans are those loans that are designed to be paid in a number of fixed equal payments over a standard amount of time. An example of an installment loan would be a typical home mortgage. 

Installment loans can be offered to individuals on a short-term basis for those who need cash immediately. These loans differ from the typical payday loan as the payday loan needs to be paid back in one full installment. An installment loan is paid in equal payments over a specific amount of time. 

Hardship Loans For Bad Credit 

It is important to understand that not all hardship personal loans are designed for individuals with bad credit. For individuals with limited credit or bad credit, the best types of loans include short-term loans, installment loans and payday loans. 

Other hardship loans that are available may not be suited for individuals without sufficient credit. 

401(k) hardship loans 

In some cases, it is possible to make a hardship withdrawal from a 401(k) retirement account. There are specific criteria in place for hardship withdrawals from a 401(k) including the type of hardship as well as the amount that can be withdrawn. 

Some of the basic hardships that are included for a 401(k) hardship loan include the purchase of a home, burial or funeral expenses, tuition and education expenses as well as various medical expenses. However, the amount that is withdrawn cannot exceed the overall cost of the hardship. 

Any money that is borrowed from a 401(k) needs to be repaid in full and is subject to various taxes as well is a 10% early withdrawal fee unless specific requirements are met. 

Home Equity Loans 

Home equity loans are one of the best ways for homeowners to receive cash for the amount of equity they have developed in their home. In many cases, the cash will come in a lump sum from the bank at a fixed interest rate that needs to be repaid over a specific length of time. 

In some cases, a home equity loan will be referred to as a second mortgage. Second mortgages are generally used to pay off other forms of debt such as student loans, large medical bills, home improvement project or credit card debt. 

While it is not common for individuals to take out a home equity loan for a large purchase it still happens and is perfectly fine. 

Hardship Loan Alternatives 

It is important to keep in mind that the majority of hardship loan options, especially hardship loans designed for bad credit are going to carry high-interest rates. Keep in mind that there are alternatives to hardship loans. 

Credit Cards 

If you are able to handle a credit card responsibly it is an excellent alternative to a hardship loan for emergency expenses or unexpected expenses. It is possible to pay off the debt immediately Considering payments are due a month after the statement closes it gives you the time to prepare the cash to pay off your bill. 

Considering that credit cards do carry a high-interest rate, it is advisable to pay off the balance in full every single month. 

Peer To Peer Lending 

Another option that is available to individuals is peer to peer lending. Peer to peer lending is an excellent alternative in which investors will fund money to individuals on a short to medium-term. In many circumstances, peer to peer lending marketplaces tends to offer more flexible terms and lower interest rates than traditional banks. This is because they are coming from an individual investor rather than a large institution. 

Family and Friends 

Another option to consider for fast cash is to borrow from family and friends. While your credit may not be the best, typically family and friends are not going to do a credit check on you to see if you are reliable to pay them back. 

However, it is absolutely essential that you do create an informal contract and both parties are comfortable with the arrangement. You’ll also want to consider the repercussions of not paying back the money and what it can do to the relationship. 

How To Get A Small Hardship Loan

If you are in need of emergency cash, you can submit an application with Jacaranda NZ for an emergency hardship loan. Hardship loans that are obtained through Jacaranda NZ are one of the best alternatives to high-interest payday loans. We’re happy to work with individuals who have bad credit but are able to obtain a loan and we offer no rollovers, debt traps or hidden fees. 

Can I apply?

Wondering if you can apply for Jacaranda NZ’s easy lender-finding service? We won’t make you jump through a set of hoops. If you can tick the following boxes of eligibility criteria, you can apply today! 

  • Be 18 years of age or over
  • Receive a regular income into a personal bank account for at least 90 days. (This is prefered but not mandatory)
  • Have a direct contact number
  • Have an email address

Ready to apply? 

Our application is 100% online meaning you can submit an application anytime, any place. You won’t have to print our paperwork or line up in lengthy queues. Simply, just submit an application online and we’ll do our best to match you with a lender suited to your preferences.   In many instances a decision can be made instantly and once approved, individuals may receive their money in as little as one business day. 

So what’re you waiting for? Apply with Jacaranda NZ today!

Want to learn more? We’ve covered all you need to know before you apply for bad credit loans!

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