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How to be approved for a $5,000 loan with good or bad credit
Need to borrow up to $5,000 today? Read our guide for all your loan options in New Zealand.
When you have a bad credit history, you’re usually not eligible for a loan from a bank or traditional credit lender. However, there are loan options available. You need to show you can repay the loan, by providing evidence of a regular income, whether that’s through employment or Work and Income payments.
⚠️ Warning: be cautious with short-term loans
If you're experiencing financial hardship and would like to speak to someone for free financial counselling, you can call the MoneyTalks helpline operated by FinCap on 0800 345 123. It is open from 8:00am to 5pm, Monday to Friday and 10am to 2pm Saturday. When comparing short term loans, ensure you take into consideration any fees, charges and rates you may be charged.
Alternatives to short-term loans
Consider these alternatives before applying for a payday loan:
- Use online Government resources. The Commerce Commission New Zealand website explains how loans works and what to be aware of when borrowing from a lender.
- Payment plans. Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan or receive an extension on your due date if you’re behind on payments.
- Contact your creditors. Speak with creditors about extending the due date of your payment, or working out a new payment plan that works for both of you. Seek personal loans elsewhere. Consider a small personal loan from a bank or a credit union. You may qualify for a loan with much lower interest rates than those offered by payday loan companies.
- Pay with credit card. Consider paying with your credit card to cover your emergency bills or payments. This is not a long term solution, as you’ll need to pay off the balance as soon as possible, but it’s an alternative to a short term loan with high – and immediate – interest rates.
Good credit and bad credit loans for up to $5,000 you could apply for
How do $5,000 bad credit history loans work?
Bad credit loans work similarly to personal loans, although they have different fees and interest rates. However, as loan providers need to offset the risk of lending to those with a bad credit history, these loans are more expensive.
A loan applicant’s credit history may or may not be checked, and this is disclosed by the lender before you apply. A loan provider checks your credit history to ensure you can reasonably repay the loan. However, lenders in the bad credit loan sphere do not disqualify applicants due to defaults on their credit history.
Tips on being approved for a bad credit loan
There is no surefire way to guarantee you can receive approval for a fast cash loan. When you’re considering applying and your credit history isn’t perfect, bear the following in mind:
- Check the eligibility criteria before applying
Lenders have set eligibility criteria, which you can check in the comparison table above. Check to see if you meet these criteria, and if you’re unsure, call the lender to discuss your situation.
- Order a copy of your credit file
While you may think you have a good idea of your credit history, your credit file is the only accurate record of your financial account. It’s what lenders use to judge your creditworthiness. You can order a free copy of your credit file from New Zealand’s credit reporting agencies, Centrix, Illion or Equifax.
- Compare your bad credit loan options before you apply
Every application you make shows on your credit file, so make sure you compare your options before you ask to minimise the number you make.
What to consider when comparing $5,000 loans
- The convenience of an online application
The convenience of online application forms and quick approval systems can save time. You also have the chance to compare a range of credit providers, which improves your choice.
- There are minimal or no credit checks
It can be difficult receiving approval for a personal loan if you have a bad credit history. A bad credit loan gives you access to lenders who look at your current financial situation when considering you for a loan. If you have significant credit problems, you can look at no credit check loans.
- Simple repayment terms
You usually make the repayments when you receive your pay, and some lenders give you options on how to make repayments. Most lenders offer direct debit repayments, so you don’t have to worry about making the repayments yourself – but you do need the money available in your account.
- Bad credit loans are high-cost
Due to the high risk of these loans, the lenders usually charge higher fees.
- Disreputable lenders operate in the bad credit loans space
Many dishonest lenders operate online, and prey on people with bad credit, so make sure you evaluate the lender before you apply.
Things to avoid with bad credit loans
There are risks associated with loans for people with bad credit. Avoid the pitfalls outlined below:
- Not being cautious. Make sure you only choose a reputable company.
- Not considering the affordability. Think twice before applying for a bad credit loan up to $5,000. The repayment period is shorter than standard loans, which means your repayments are quite high. Lenders usually provide calculators to show an indication of your repayments.
- Not considering the fees and the interest rate. Lenders charge you an interest rate, as well as fees and other charges. Check these before you apply and consider the total cost of the loan. Make sure you understand what the lender charges for late payments or if you default on the loan.
- Disreputable lenders. The lender should be easy to contact and check that it has a credit licence.
- Unaffordable repayments. Consider how much the regular repayment is and that you can repay the loan during its term. If you fail to repay on time the loan provider can charge extra fees. Also, repayment periods for bad credit loans are usually shorter than regular personal loans.
- Multiple applications. Although bad credit lenders may not take your credit history into account, multiple applications in a short time have a negative impact on your credit score, as each loan application appears on your credit report.
- Long-term repercussions and legal issues. Once you sign for a loan agreement, you are is bound by its conditions until you fully repay the loan, including all associated rates and fees. Bad credit loans are usually unsecured, so the lender can start legal proceedings if you can’t repay.
Quick ways to borrow money
|Type of lender||Interest rate range||Turnaround time|
|Traditional bank||6.99% to 22.90% p.a.||1-3 business days|
|Online lender||6.99% to 49.95% p.a.||1 hour – conditions apply|
|Payday loan||39.99% to 292% p.a.||Same day|
|Peer-to-peer loan||6.49% to 18% p.a.||Next business day|
Frequently asked questions about bad credit loans
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