Finding the right personal loan with the cheapest rate and the lowest fees should be easy. That’s why we’ve gathered loans from banks, non-bank lenders, peer-to-peer lenders, credit unions and more in one place.
We can help you find the best personal loan for your circumstances, provide the information you need to choose the right loan, and help you decide how much to borrow.
What is a personal loan and how do they work?
Personal loans are an agreement between you and a lender for you to be given a secured or unsecured line of credit up to $100,000 and pay it back over time. You can use the money for a range of purposes, such as buying a car, consolidating debt, paying for a wedding or even taking a holiday. Here’s how they work:
Application and approval. You can apply for a personal loan from a bank, credit union or standalone lender online. It can also be done over the phone or in-branch, depending on what application types the lender offers. The time it takes to be approved depends on the lender, but it can range from anywhere between 60 seconds to a few days.
Loan contract. When you are approved for a loan you will need to agree to a loan contract that sets out certain terms. These terms include how long you will have to repay the loan (the loan term), what fees you need to pay, and the rate of interest you will be charged on your loan amount.
Loan terms. Your loan terms will be set out in your loan contract. Generally, loan terms range between three months and seven years. You will have to make repayments weekly, fortnightly or monthly – most lenders allow you to choose what is best based on when you receive your income.
Loan costs. Lenders agree to lend you money in exchange for interest, which is charged annually. This interest can be fixed or variable. Other loan costs include establishment fees, monthly fees and direct debit fees. You should also check if you will be charged fees for repaying your loan early or making additional repayments. Cheap personal loans have less fees and no early repayment penalty compared to other loans.
Loan types. There are a variety of personal loans available in the market, and each one has its own terms and restrictions. For instance, when you apply for a car loan, the lender often requires that the entire loan amount be used for your car purchase. The car is also generally required to be used as security in case you default on the loan. An unsecured personal loan, on the other hand, is less restrictive and you can use the loan amount in almost any way you choose.
Types of personal loans available
There is a wide range of personal loans available in New Zealand to those who have stellar credit, average credit or bad credit. Find out what loan may work for you with the below options.
Secured personal loans. This type of loan works by you offering an asset as security in exchange for lower rates and fees. Usually, this loan is used to purchase a car, but other types of assets can be used as well.
Debt consolidation loan. Existing debt can be managed by taking out a debt consolidation loan. Consolidate separate loan accounts into one easy-to-manage loan with a potentially lower rate and with fewer fees.
Overdrafts. An overdraft is a lot like an unsecured loan but it is generally attached to your everyday bank account. You are given a set amount that you can withdraw from your account, once your own funds have been exhausted.
Personal loans are useful tools when you’re juggling existing debt, facing specific types of bills or looking to leverage improved credit.
If you’re struggling with multiple debts
A top reason borrowers take out a personal loan is to consolidate and pay off debt. Debt consolidation involves taking out a personal loan in the amount that you owe on your existing credit cards or loans and using the funds to pay off your creditors, ideally at a lower rate than the average you’re paying today. You repay your loan with fixed monthly repayments over a set period of time — usually up to 60 months (five years).
Because personal loans typically have lower interest rates than credit cards, you can save on unnecessary interest. If you consolidate two or more bills, you also simplify your life by paying one monthly payment to one lender.
If you have a personal loan and your credit has improved
If your credit score has improved or you’re making more money than you did when you originally took out an existing loan, you might be able to save money by refinancing.
Refinancing involves taking out a new personal loan to pay off a loan you already have in your name. While many borrowers refinance to take advantage of a more favourable rate, you can also refinance to take a cosigner off your loan or lower your monthly repayments.
If you have an expense you can’t put off
You need to buy a plane ticket, but you don’t have the time to save up for it. Or maybe you need to move cities for a new job but you don’t have the savings on hand.
In these cases, a personal loan can help you get funds you need to take advantage of an opportunity. While it’ll cost you more than paying up front, that once-in-a-lifetime adventure or more lucrative job could outweigh what you’ll pay in interest.
If your insurance won’t cover a medical procedure
A personal loan isn’t always the best choice for covering the costs of an upcoming medical procedure. But if your only other option is in-house financing, you might find a better deal with a personal loan provider.
Ask your medical provider about its in-house rates and terms before you shop around to make sure you’re getting the most competitive offer you’re eligible for.
When is it best to avoid personal loans?
A personal loan can offer lower rates than credit cards and other forms of debts. But it might not be the right solution under a few key circumstances.
If you can easily save the money
Have your eye on a luxury item or feeling the itch for an exciting holiday? If your needs aren’t immediate, you might want to work out how much your repayments would be and save that amount each month instead. Otherwise, you could be paying for your splurge many years later.
If it’s a bad investment
Are you thinking of borrowing for home improvements or another investment? Make sure it’s bound to add value in the long run, otherwise you could be left paying interest on an improvement that ultimately lost you money.
If your income and employment aren’t stable
Taking out a personal loan when your finances are unsteady could hurt you in the long run. If you have reason to think your income or employment situation might change for the worse, consider cutting back on expenses or putting money away in a high-yield savings account instead.
How to compare personal loans
When comparing your personal loan options, it is helpful to keep in mind the range of features available with these loans. When you are comparing the options, here are some of the questions you need to ask.
What are you taking the loan out for? The purpose of your loan should help narrow down your options. Some loans, such as car loan, are designed with a particular purpose, while others are more open.
How much do you need to borrow? Depending on the amount you need to borrow, you may find your options more restricted. Check the individual loan products and take a look at what the minimum and maximum loan amounts are.
Does the loan have a competitive interest rate? Compare rates different lenders to ensure you are getting the best deal. Keep in mind that interest rates are often given as a range, and the actually rate you’ll receive will depend on your financial situation and credit rating.
What repayments can you afford? When comparing your options, you should ensure you can make your repayments. Put together a budget with all your essential outgoings and living costs like rent payments, utility bills, groceries and insurance, so that you can see how much of your salary or wages you have leftover.
What are the fees and charges? If you’re looking for a cheap personal loan, you need to consider both ongoing fees and fees charged at the onset of the loan. Common fees include an application fee or loan set-up fee, while monthly fees and annual fees are common ongoing fees. You may also be charged to use additional features of the loan.
Is there repayment flexibility? How often are you able to make repayments? Are you able to make additional repayments or pay off the loan early without penalty?
Do the loan terms match your needs? Personal loans are usually offered for terms of between three months and seven years. Some lenders are more restrictive than others when it comes to how long you have to repay your loan, for example, only offering terms of one, three or five years. Make sure the loan terms on offer are what you need. Long term loans over seven years often see lower repayments, but you will pay a greater amount of interest.
Did you know that every time you apply for a personal loan, it is recorded on your credit file? So when you find a personal loan, and you want to apply, make sure you do so correctly, as multiple applications can look irresponsible to lenders.
How much can I borrow?
There are a few considerations that come into play when determining how much you can borrow, including how much you can afford to repay and your loan purpose. Regarding how much you can apply to borrow, it usually comes down to the type of loan you apply for.
Before you consider taking out a personal loan it’s important to know if you will be able to afford the repayments. To work this out you can use our personal loan calculator below. You can also compare loan interest rates and fees to see which loan will be cheapest over time.
*Whilst every effort has been made to ensure the accuracy of this calculator, the results should only be used as an indication. They are neither a recommendation nor an eligibility test for any product and should not be construed as financial advice, investment advice or any other sort of advice.
What fees are involved?
The fees you are charged depend on the loan you apply for (you can compare these on the table above), but each loan type typically comes with similar costs.
There are three types of fees you should expect: Upfront fees, ongoing fees and fees that are charged if you default on the loan or miss a repayment. Some lenders also charge fees if you repay your loan back early or make a lump sum payment.
Establishment fee. Most lenders charge an establishment fee to cover the cost of setting up the loan. The fee varies depending on the provider and the amount of your loan, but can be as high as $500.
Ongoing fees. Some loans have ongoing account fees charged weekly or monthly for account maintenance. These usually start from $2 a week. You may also be charged a direct debit fee on top of this.
Payment default. If you miss a payment or do not have funds in your account when your direct debit is due to go out, you could be charged a payment default or insufficient funds fee. If you don’t get your payments back on track, there could be further charges added to your account.
Early repayment. While some lenders encourage you to pay back your loan early without penalty, others will charge you for doing so. This is because they lose out on the interest payments so try to recoup costs in another way.
Loan variation. If you want to change the terms of your loan or extend the loan amount, a loan variation fee may be charged. This is not usually more than the original establishment fee but can still be hundreds of dollars in some cases.
Other fees that may apply to your loan include:
Debt collection recovery fees
Paper statement fees
It’s important to understand exactly what fees you may be charged before you sign your loan agreement. Some lenders are more transparent with their fee structure than others – you can find out likely charges before you apply by looking on their website. If you are applying through a broker, fees can vary depending on the lender that the broker arranges a loan contract through and you won’t find these out until you apply.
Am I eligible for a personal loan?
Eligibility criteria for personal loans are set by each lender and are different for each type of personal loan. Some criteria are more strict than others. Generally, for any type of personal loan, you need to be over the age of 18 years, a New Zealand citizen or permanent resident and receive a regular income into your bank account.
If you don’t fall in to the typical lending criteria for a personal loan, it may still be possible to get the finance you need depending on your situation:
If you have a low income. Applicants with low incomes can still be approved for loans. However, it is always a good idea to check the borrowing requirements and check your repayments with a calculator.
If you receive Work and Income payments. If you receive a pension, Work and Income payments or other benefits, you may still be eligible. It is important to make sure you can meet the repayments before applying as a beneficiary.
If you have bad credit. You are still able to apply for certain personal loans if you have negative marks on your credit file. You might end up paying a higher interest rate on these loans, so it is important to compare a range of offers before applying.
If you have existing credit card or personal loan debt. You may still be approved for a new personal loan, but you should calculate your repayments and your debt levels before continuing.
If you don’t meet the minimum requirements. You still might be able to apply with a guarantor. This is where someone, usually a family member such as a parent, agrees to ”guarantee” your personal loan should you fail to meet your obligations.
If you are a temporary resident with a work visa. While many lenders require applicants to be a New Zealand citizen or permanent resident, you may still be able to get a personal loan if you hold a temporary visa. Find out which banks might offer you a loan, what the criteria are and how you can maximise your chance of being approved.
How can I improve my chances of the loan being approved?
There is no way to guarantee approval for a personal loan, but giving yourself the strongest chance at being approved starts with meeting the eligibility criteria set by the lender. To further your chances of being approved, keep the following in mind:
Establish your borrowing capacity. What repayments can you afford? Lenders will use a variety of criteria to decide how much you are eligible to borrow, but you need to know how much you can afford to repay.
Build a good banking history. Keep your account in good standing to build a positive relationship with your bank, even if you don’t plan on borrowing from them.
Keep your credit rating in good status. Make sure you keep track of all your payments, from credit cards to utility bills, because any arrears, debts, or missed payments will affect your ability to access credit.
Keep track of your saving goals. If you manage to contribute to your savings regularly, it shows lenders you are likely to manage ongoing loan repayments.
Open a transaction account with the lender you’re applying with. If you’re applying with a bank that has transaction accounts and the personal loan isn’t time-sensitive, establishing a banking history with the lender can help get your application across the line. It can also speed up the application process.
Reduce the limit of your credit card/s. Not using your entire credit card limit? Consider lowering it if you’re not planning to use it soon. You’ll need to list the total limits of your credit cards on your personal loan application and any credit limit will be seen as a potential debt by the lender.
Pay off some of your credit card debt before applying. If you take a look at your loan application (before submitting it) and the lender asks what is owing on your credit cards, see if you can pay down the cards before sending in the application. They are able to check the limit of your card on your credit report but not the amount owing – this is up to you to tell them.
Make sure you’re out of your 90-day probationary period before you apply. Lenders don’t want to take the chance of giving you a loan during your probationary period. They will not approve a loan if you haven’t been employed at least three months, no matter how secure you tell them the role is. If you have only been employed for six months, your employer may receive a call to confirm you’re out of your probation period.
How to apply for a personal loan
Confirm how much you need and why. Make sure you know how much you want to borrow and have worked out that you can meet the repayments.
Choose a secured or unsecured loan. If you already own an asset or are looking to buy one, then a secured loan may be an option. If not, you will need to consider an unsecured personal loan.
Choose your terms. Our loan calculator above can help you work out what your repayments will be based on different loan terms.
Start your personal loan research and comparison. This is an important step to finding the right loan option for you. You can compare loans from different lenders in the table at the top of this page.
Click through and apply. Most lenders allow you to complete an application form online at a time convenient to you. You can also upload documents and have everything approved and signed without leaving home.
What information do I need to provide?
The amount of information that you are required to give can depend on the lender and type of personal loan. You can expect to be asked for some or all of the following when completing an application form:
Personal details. You need to provide your name, contact information and proof of your identity.
Employment information. This includes where you work, your income, and the name and contact information of your employer.
Details of your assets. You should include properties or vehicles you own as well as any savings or investments.
Details of your liabilities. Liabilities refer to any open credit accounts, existing credit and store cards and any debt you owe on your mortgage or other loans.
Each bank and lending institution has its own criteria you have to meet to finalise your loan application.
You will usually need any of the following to prove your identity:
Driver’s licence/18+ card
In many cases, either a passport or driver’s license is all that is needed, but some lenders ask for two forms of identification. If so, a photo ID and another card such as a Community Services Card or credit card with embossed name is usually sufficient.
If you are not a New Zealand citizen, you will also need to show your residency visa.
Any time you take out a loan with a lender you don’t have a relationship with, you will need to prove your address. The following documents are often suitable:
Government letter, for example, a letter from the IRD or WINZ
Utility bill – phone, power or broadband
The document will need to be dated within the last three months and clearly show your full name and correct current address.
You will need to verify your income but the actual verification required may differ between lenders. Common requirements are as follows:
Payslips for the previous three to six months
Bank statements for the past three months
Two years tax returns (if self-employed)
Many lenders that operate online use special software that allows them to view your bank accounts in a secure way. This saves the hassle of printing and sending statements and doesn’t give access to any functions within your accounts.
You may also need any of the following documents:
Statements from other loan accounts, credit cards or store cards
Income statements from any of your income-producing assets
A list of your current expenses
A current rent or mortgage statement
Secured loans, as the name suggests, means you offer something of value as security on the loan. If you don’t pay, the lender can repossess your car (or any other item offered as security) and sell it.
You may be able to pay back your personal loan early but it depends on the conditions of your loan. Some lenders charge a fee for early repayments.
If you are having trouble repaying your loan you need to get in contact with your lender as soon as possible. They may be able to organise a payment plan with you or offer some sort of option to help you manage your repayments. You also have the option of getting in touch with the Citizens Advice Bureau on 0800 367 222 and they will put you in touch with a non-profit organisation that can help to organise your budget.
Pre-approval is a conditional approval of a personal loan. To arrange pre-approval, you still have to apply to a lender and they agree to provide you with finance as long as certain conditions are met. Pre-approvals usually last for three to six months.
One common type of pre-approval occurs when you want to purchase a vehicle. The lender agrees to provide you with a certain amount of money but will not give you the funds until you purchase the vehicle. The conditions that need to be met will include that the vehicle is of a certain value. Also, the lender is likely to send the funds directly to the car dealer, not you.
You have the option of taking the personal loan and using the funds or rejecting the loan offer. Bear in mind the lender will list the credit enquiry on your credit report and affect your next loan application. Excessive credit enquiries in a short space of time can negatively impact your credit score.
The answer to this question depends on what type of loan you are applying for. If you want a secured car loan then all details of the car, finance agreement and registration must be given to the bank or lender before you receive the money. However, if you are getting an unsecured personal loan, then you only need to give a general idea of the loan purpose to the bank. If you are consolidating debts, you will have to give details of your other loans and credits to the institution.
You can consider an unsecured personal loan or a secured personal loan if you are buying a car. Personal loans can be used for purchasing a car, especially if you want to buy an older model or a car that does not fit with a lender’s criteria. An unsecured personal loan could be used for a car, but it is important to keep in mind that unsecured personal loans come with a higher interest rate than a loan secured to a vehicle.
Credit unions are different to banks in that they operate on a not-for-profit business model. Typically you will find there are not as many fees or charges with a credit union loan, which means the interest rate may be lower. Credit Unions are governed by the same regulations as banks so it is just as safe to apply for a credit union personal loan.
Credit cards can give you convenient access to a line of credit and you do have the choice between a personal loan or credit card for a variety of purchasing needs. To work out which option is right for you, think about how you need to make the purchase (if it is in cash you will be charged a cash advance rate with a credit card); how you want to repay your loan (you can choose to just repay the minimum amount with a credit card); and what you are purchasing with the funds.
Whilst a short term loan, also known as a payday loan, is a type of personal loan, this type of lending is completely different. Personal loans are generally taken out over three months to seven years, whereas a payday loan is usually between seven days and one year. Payday loans are also for smaller amounts – between $100 and $5,000 – and are often available to those with bad credit.
Many lenders offer loan protection insurance as an add-on to your personal loan. This insurance can pay the minimum repayments on your personal loan if you lose your job or cannot work because of illness or injury. You usually apply for the insurance when you are approved for the loan but you may be able to get the insurance further into the loan term.
Most lenders will have a minimum income you need to earn to be eligible, but others will only require that you are employed or have the means to repay the loan.
Lenders use a variety of information to determine your eligibility for a personal loan, including your credit rating. The information on your credit file includes negative information such as defaults and bankruptcy listings; and personal information such as your name and address. From 2012 onwards, New Zealand credit agencies have included positive information about your credit history, such as regular credit card and mortgage repayments.
Yes, personal loans can help with your business needs too. You can access personal financing to help cover business needs — everything from trucks to equipment can be purchased or even leased with a personal loan. The same is true even if you have bad credit. Business vehicles including company cars, trucks or vans can all be financed with a personal loan. If your business requires specific equipment to purchase or lease, such as forklifts, earthmoving equipment, workshop machinery or even office equipment, you can take out a personal loan to help cover the costs. You won’t have to hurt your business’ cash flow to make the purchase.
Elizabeth Barry is Finder's global fintech editor. She has written about finance for over six years and has been featured in a range of publications and media including Seven News, the ABC, Mamamia, Dynamic Business and Financy. Elizabeth has a Bachelor of Communications and a Master of Creative Writing from the University of Technology Sydney. In 2017, she received the Highly Commended award for Best New Journalist at the IT Journalism Awards. Elizabeth's passion is writing about innovations in financial services (which has surprised her more than anyone else).
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