An unsecured personal loan lets you borrow funds without using an asset as security. You can use this type of personal loan to make a large purchase, consolidate debt, pay for a holiday and many other reasons. Find out if this type of loan is right for you and compare available offers.
Harmoney Unsecured Personal Loan
Harmoney Unsecured Personal Loan
Borrow from $2,000
Harmoney Unsecured Personal Loan
Apply today to get approved within minutes for up to $70,000.
Max. loan amount: $70,000
Loan term: 3 or 5 years
Turnaround time: 99% of approved online applications funded in 24 hours
Fees: Establishment fee of $200 for loans from $2,000-$5,000 and $450 for loans from $5,000-$70,000
No early repayment fees
Personalised interest rates based on your circumstances
Unsecured loans involve you receiving a certain amount of funds that you can use for any worthwhile purpose. You then pay the funds back with fees and interest.
While you can generally use the loan how you choose, you may be asked for the purpose in your application. This will form part of the lender’s decision. When completing your application you will also need to list how much you want to borrow and for how long.
Unsecured vs secured loans
Interest rates on unsecured loans are higher than they are for secured loans as the lender is taking on a higher risk. If your loan is secured the lender can take the asset you have used as collateral to recoup the outstanding amount, but this isn’t possible with an unsecured loan. To safeguard themselves, lenders charge more interest so they have more to fall back on should you default.
How to compare unsecured personal loans
Comparing your unsecured personal loan options is an important part of finding the right loan for you. Here are some things to keep in mind when doing so:
Interest rate. Unsecured loans tend to have a higher interest rate as the lender is taking on more of a risk than with a secured loan. Non-bank lenders usually advertise their interest rates as a range, and the rate you receive is determined by your financial situation and credit history.
Loan terms. An unsecured personal loan can be taken out for a term of between six months and seven years depending on the lender. A longer term means that your weekly, fortnightly or monthly repayments will be smaller, but you’ll end up paying more interest over the course of the loan.
Minimum and maximum loan amounts. All lenders set a minimum you can borrow (between $1,000 and $5,000) and a maximum that usually varies between $50,000 and $75,000. It is important to check the amount you need falls between the two.
Fees and charges. You may be charged upfront and ongoing fees with unsecured loans, so check what these are before you apply. Fees include an establishment fee, monthly maintenance fees, direct debit fees and early repayment fees.
Repayment restrictions. Some lenders allow you to make additional repayments and repay your loan early without penalty. Others will charge an early repayment fee.
Additional features. Your loan may come with additional features you may find convenient, such as online account management; a redraw facility to access additional repayments, or discounts on additional products offered by the lender.
Financing a trip away
Horace is looking for a way to finance his travels over the break before he returns to work as a school teacher. He doesn’t have enough money saved and is looking to take out an unsecured loan as he knows he is able to afford ongoing repayments on his current salary. He compares his options and finds a loan he can afford to repay within a year -he does not want to run the risk of a longer repayment period in case he loses his job. He checks whether he is eligible and then applies. He soon finds out he has been approved and makes his way to the Canary Islands.
Pros and cons of unsecured personal loans
No asset needed for security. When taking out an unsecured loan, there is no need to supply an asset as security. If you are purchasing an asset with your funds you won’t have to risk it being repossessed, and you also won’t need to risk an asset you already own.
Flexible loan purpose. You can use the funds however you like. Once you are approved, the funds will be transferred to you and you can use them to consolidate debt, purchase what you need or to even invest.
Easy application process. Applying for an unsecured personal loan is fairly easy. You can apply for most loans online and submit the required documentation without leaving home. Depending on the lender, you may get a response in as little as 60 seconds and have the money in your account on the same day.
Penalties for missed payments. Again, due to the lack of a security asset on an unsecured loan, the lender can charge you higher fees for late payments. They may even take legal action against you or take you to court if you default on the loan.
Higher interest rates due to no collateral being offered. As there is higher risk involved for the lender, the interest rates are generally higher on unsecured loans. This is to cover the fact that no collateral is involved with the loan.
You may not be approved. Without security, a lender has to be satisfied that you can meet the terms of your loan agreement. You may not be approved if you have some issues on your credit report or do not manage your money in a satisfactory manner.
Common mistakes to avoid
Lying about what you need the funds for. Always be upfront with your lender about why you are applying for the loan, whether it be for business purposes, to buy a new car or to consolidate debt.
Getting into too much debt. If you are taking out an unsecured loan to consolidate existing debt, you should be wary of getting yourself into financial trouble by increasing this debt. Make sure you pay are paying less with this new loan than you are currently.
Borrowing from an unlicensed lender. Always make sure you are getting an unsecured personal loan from a licenced lender. All providers must be licenced with the Financial Market Authority. There are also joint provisions made with the Australian Securities Investment Commission in New Zealand for companies that offer products in both countries. All lenders featured on this page are licenced.
Not checking fees and charges. Where possible, always do your best to avoid excessive fees and charges. The best way to do this is to make sure you do your research, ask questions and compare. Many lenders have a loan calculator on their website that factors in establishment fees, ongoing fees and interest costs to get an idea of what the loan will cost you. Additional fees or a different interest rate may apply, so use these calculators as a guide only.
How to apply for an unsecured personal loan
If you think an unsecured personal loan is for you, use the comparison table to compare your options. After browsing through the table and finding a suitable loan, click the relevant link to go to the lender’s website and start the application process. Typically, to get an unsecured loan you will need to meet a range of criteria set by the lenders:
Bee at least 18 years old.
Be a New Zealand citizen or permanent resident. Some lenders will accept applicants on a work visa.
Have a good credit rating and be able to provide proof that you can pay off the loan.
Able to provide copies of your payslips, bank account statements and other credit contracts.
You also need to provide proof of ID, such as your driver’s licence or passport.
Some lenders may allow you to use the funds from an unsecured loan for business purposes, but others will not. You need to confirm this with the lender before you apply.
While unsecured personal loans do generally come with higher rates than secured personal loans, you may still be able to find a competitive low rate option. Compare your options using the table above and find a loan that meets your budget. Alternatively, check what rates your bank has for its personal loans.
Unsecured personal loans tend to offer terms of between six months and five years, but some lenders may offer longer or shorter terms.
There are two reasons this might have happened: A lender may operate on a tiered-rate system, where your rate is determined by the information in your application; or the lender approved you but then found you to be a higher risk, so applied a higher rate to your account.
Matt Corke is Finder's head of publishing for rest of world and New Zealand. He previously worked as the publisher for credit cards, home loans, personal loans and credit scores. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time, he has survived the dot-com crash and countless Google algorithm updates.
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