Lending is all about the assumption of risk. A lot of people don’t want to lend money because they know that there’s a good chance they won’t be able to recover the amount. Yet banks and other lenders are able to do so profitably by being wise about who they give money to and how they mitigate the risks. For example, they look to the applicant’s debt to income ratio. It means they sum up all the existing debts including mortgage, other car loans NZ, credit card debts, student loans, and personal loans. Ideally, the payments for these should be less than a third of the monthly income. If it is higher, then you should consider ways to improve your DTI.

The first thing you should look into is reducing your debts. Pay off what you can right away so you won’t have to worry about it anymore and lower the monthly payments. Hold off on taking on more loans until you get this into a more manageable level. If you ever get a windfall such as an inheritance, a bonus, or a lottery win, then use it to pay down your debts as soon as possible. Don’t use it to spend frivolously on things that you don’t really need. Instead, help yourself and alleviate your stress by improving your financial position. You can put what remains into your emergency fund until it’s good for 12 months. In case anything is left, you ahead and spend on whatever you want.