Unsecured loans NZ are issued and approved based on the borrower’s creditworthiness rather than any form of collateral. They are also known as signature loans and personal loans. A borrower can get approval for this kind of loan without using any form of collateral like a car or home.
When it comes to loan approval, a lender takes into account the credit score of a borrower. A credit score reflects the ability of the borrower to pay back the loan. Also, it depicts the borrower’s creditworthiness based on his credit history. When an applicant has a good credit rating, they are better positioned to secure unsecured loans as their previous history gives the lender the assurity that the borrower never defaults on his payments. On the other hand, if the credit score is poor or shows no previous borrowing, it imposes a more significant risk on the lender. Since the loan has no collateral backing, most borrowing institutions prefer to grant these loans to those applicants who have a clean credit history.