Personal loans offer a fixed amount of credit over a fixed loan term
Personal loans are one of the most flexible, multi-purpose and affordable credit options available.
They offer customers a fixed amount of credit which is paid out in full to the customer upon approval - they are not revolving lines of credit and you will not be able to withdraw more money if needed at a later stage. Personal loans may offer borrowers any amount from as little as $1,000 to as much as $1,000,000 and may have loan terms that stretch from 6 months to 7 years.
While many mainstream lenders refer to personal loans simply as personal loans, online and alternative lenders may also call them by other names depending on their intended use. For example car loans are a type of personal loan and so are short-term loans, travel or holiday loans and renovation loans. For the purposes of this website we prefer to view personal loans as those which offer medium to large amounts of money at terms longer than 1 year and can be used for any purpose.
Where can I get a personal loan?
One of the best places to get a personal loan would be from a credit union since their rates tend to be the lowest and their loan amounts are flexible. All large banks and mainstream lenders offer personal cash loans but may refer to them by varying names depending on what the loan is intended to be used for.
You can also obtain a personal loan from peer-to-peer lenders, online lenders, pawnbrokers and payday lenders which operate both online and from a store-front. It is essentially your current credit status and loan needs that determine where you can get a personal loan from.
Secured vs unsecured personal loans
Personal loans have two major categories - secured and unsecured. Banks and larger lenders usually offer both types of loans while smaller lenders tend to offer either the one or the other.
Secured loans are those that require some form of security to be offered by the borrower in order to secure the loan - this is generally in the form of a fully owned home or property or equity in a home. Some lenders may allow you to obtain a secured loan with your fully paid off vehicle.
In essence the lender offers you a loan based on the equity of the property or resale value of the vehicle and if you do not make the necessary repayments the security is reposed so the lender can recuperate his money. Secured loans are ideal for people who have bad credit histories and cannot qualify for an unsecured loan as well as for people who want a large loan amount or wish to obtain the lowest possible interest rate.
Unsecured loans are those which require no property or vehicle to be offered in exchange for the loan and are preferred to the secured option since there is less risk of losing one's property. Unsecured loans are ideal for people who want to borrow a small amount of money, those who have good credit and those who do not have any security to offer to a lender.
Most lenders will only allow you to borrow less than $5,000 if you cannot provide any security however, with certain banks are credit unions where a borrower has established a long term relationship you may be able to secure more. Payday loans and cash advances are essentially unsecured personal loans but, they carry higher fees and shorter loan terms and are therefore best categorized separately.
Top personal loan features:
- Offered by almost all NZ lenders including credit unions, banks, peer-to-peer lenders, online lenders and pawn brokers
- Offer flexible loan amounts from $1,000 to $1,000,000
- Offer flexible loan terms from 6 months to 7 years
- Can be both secured & unsecured
- Generally carry the lowest interest rates
- Can be used for a variety of purposes including: consolidating debt, renovating your home, taking a holiday, buying a car and paying for a wedding
- You can apply for a personal loan online
Important factors to note:
- It may take 48 hours and above to obtain the loan
- People with bad credit may not qualify with certain lenders
- People with bad credit receive less favorable interest rates
- You may need security to secure a personal loan
- Do not offer small amounts of money or short loan terms
Do I qualify for a personal loan?
With such a large number of lenders offering personal loans in NZ, almost everyone can qualify for one - it's really all about finding the right lender for you. Typically a lender will require the following in order to approve your application:
- You must be over 18 (some lenders require you to be 22)
- You must be a resident of NZ
- You must be able to provide a photo ID
- You must have an active bank account
- You must be employed or self employed and earn a stable income
- You must be able to provide your most recent payslips or bank statements to prove income
- You may not be bankrupt, under review or have a negative credit history
Taking the above into account, there are many lenders who specialize in providing personal loans to people who have bad credit and, those who can offer up security are more than likely to be considered regardless of credit history.
How to find a suitable personal loan?
As mentioned, almost all lenders whether they operate from a store-front or online offer personal loans with varying loan amounts, loan terms and application requirements. The best way to find a suitable loan is to compare lenders based on your loan needs.
If you are looking for a large secured loan then you should compare loans offered by banks, credit unions and online lenders that offer big secured loans. If you are looking for a small loan but, have bad credit, you should consider all lenders who offer unsecured bad credit loans as well as lenders who offer small secured loans.
You can then eliminate lenders based on the loan amounts they offer, based on their application requirements and, most certainly, based on the rates that they offer. That being said, you should note that just because a lender offers you smaller monthly repayments over a longer period of time does not mean that their rates are lower or that you will save money in the long run - it's quite the opposite.
The longer the loan term the more you will end up paying in terms of interest because you will be paying that interest for a longer period of time. It therefore makes sense in certain situations to opt for a lender that offers a shorter loan term with slightly higher interest rates, so that you can pay the loan off quickly and save money.