Personal loans from banks

A personal loan from a bank can offer you a secure and flexible solution to your credit needs

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If you’re in the market for a personal loan, the number of loan types, lenders, interest rates and fees to compare and choose from may overwhelm you. You want to choose a loan from a provider that you feel secure with, meets your needs and also gives you confidence that you’re getting the best range of features on the market. A personal loan from a bank might offer you these features, and if you choose your current bank, you have the added convenience of all of your accounts in one place.

How do bank loans differ from personal loans with other lenders?

Bank loans work in the same way as personal loans from other lenders. The main difference with a bank loan is because the bank is typically a larger lender you may have certain advantages you don’t get with other lenders.

These features include the ability to bundle your loan with other financial products; access to physical branches to manage your loan, and online banking access. It is also more convenient to get a loan if you have existing financial products with the same bank.

What types of personal loans do banks offer?

Banks offer a wide range of personal loan products to meet most borrowing needs. Here are some of the loan products that you can expect to find at a bank:

  • Secured personal loan. This type of loan is usually used to finance a car or another large purchase, and typically uses the new acquisition as security against the loan. This security lessens the risk of default for the lender because if you can’t make repayments, they can take the new asset as payment. The decreased risk usually results in lower interest rates and fees, but you typically need to use the entire loan amount to finance the specific asset.
  • Unsecured personal loan. An unsecured loan offers more flexibility regarding use than a secured personal loan and doesn’t require you to use an asset as a guarantee. These loans are an increased risk for the bank, so the provider usually charges higher interest rates and fees. The banks may impose stricter lending criteria than with a secured loan.
  • Personal overdraft. With an overdraft, the bank lets you withdraw more money from a bank account than you have available. The lender usually charges a monthly fee for the convenience, and they also predetermine the amount you can overdraw. You then automatically repay the overdraft facility when there are sufficient funds available in your account.
  • A line of credit. A line of credit works similarly to an overdraft as you can withdraw a set amount of funds when you need them. However, a line of credit is usually for a more significant amount. Also, you don’t pay any rates or fees on this service until you use it and the lender only charges these on the amount of money you withdraw rather than the total amount available in your account.
  • Debt consolidation loan. If you have a few separate loans or credit accounts, eg credit card debt or a car loan, you may want to combine these debts into one loan. These are referred to as debt consolidation loans and allow you to repay your other loans by transferring the debt. The benefit of this is it enables you to manage your repayments better as you only have one loan to pay off and you may reduce the amount of interest and fees you are paying on the separate loans.

Should you get a bank personal loan? Weigh up the pros and cons

  • The convenience of having your loan and other financial products in one place.
  • Banks may be able to offer more advanced and flexible features than other smaller lenders.
  • If you have been with your bank for a while and have a good relationship, you may have a better chance of securing a loan.
  • Interest rates and fees may be higher than with other lenders.
  • Stricter lending criteria which may limit access for people with bad credit.

Anything else to consider?

People sometimes choose to get a loan from their current bank without comparing their options online because it seems like an easy way to access credit. To ensure you receive the best value loan, shop around to see what other options are available, then choose the one that best suits your needs.

How to apply

Compare your bank loan options using the comparison table above. Once you find the right loan for you, click the “Go to site” button which will securely transfer you to the bank’s online application form. Depending on the bank you choose, you have to submit different details as part of the application process. However, lenders usually require personal and financial information, including details of your income, assets and liabilities. To secure a personal loan from a bank in New Zealand, you need to be over the age of 18, a New Zealand citizen or permanent resident and have a good credit rating.

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