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Low Income Loans

If you're a low income earner, this guide outlines the types of loans available. We compare and evaluate credit union loans, Work and Income advances and emergency assistance, payday loans, borrowing from friends, low-cost loans, credit cards and more

Updated 1 October 2022

Important: Please do not rush reading this guide. We know a quick loan approval is your focus right now, and that low income earners often get the worst interest rates in the market. However, this guide contains many options that can help you while minimising or eliminating repayment. We have put it together carefully for your benefit. Spending 5-10 minutes looking at ALL the options presented will help you make a financially sensible decision.

Top tip: We strongly suggest contacting Work and Income to see if you qualify for Hardship Assistance (to cover urgent costs and living expense assistance). This support is available to any New Zealand citizen or resident who needs urgent money. 

Our Guide to Low Income Loans
If you’re a low income earner, there are a number of options for a loan. In this guide, we compare and evaluate credit union loans, Work and Income advances and emergency assistance, payday loans, borrowing from friends, low-cost loans, credit cards and more.

​Our guide covers:
Know this first:
  • Loans for low income earners are, traditionally, given at higher-than-average interest rates.
  • Many low income earners consider payday loans. The New Zealand government changed the law in May 2020, meaning interest and fees are capped at 100% of the loan, but despite this, the interest rates charged are still high.
  • Most lenders ask for security – i.e. a guarantee, to make sure the loan is repaid. Usually, you’ll be asked if you own a car or know someone who will guarantee the loan (i.e. repay it) if you fail to repay it.
  • The Salvation Army and other social enterprises offer low-interest and even 0% interest loans. Their experienced teams also help you rebuild your finances. 
  • Payday loans and truck loans are best avoided – they usually make a debt issue even worse.
  • Low income earners are eligible for Work and Income assistance. Our hardship, living costs and emergency assistance grants guide should be considered first as it walks you through everything you need to know about what's available and how to apply. Such grants can let you avoid applying for a loan altogether. 
  • As our video explains below, payday loans (also known as cash advances and same day loans) are best avoided as they risk serious financial hardship:

Low Income Loans Frequently Asked Questions

If you're a low income earner, you may feel like only high-interest loans are available. This is not the case; our FAQs answer popular misconceptions to help you make the right decision for your needs.

Can I get a loan if I'm a low income earner?

Yes – but at a higher than normal interest rate. The loans you see advertised for 5.99% p.a. or at least under 8% p.a. are usually only available to someone with a 'above average' income and good credit score. As part of the application process, the lender asks for payslips or proof of income. Your interest rate will be influenced by your income level.

I’ve never heard of the companies offering "fast approval loans for low income earners" – should I trust them?

It depends on who is offering the loan and their reputation. While most banks and credit unions loan to low income earners, the likes of Cash Converters, Instant Finance and other high-interest, high-fee lenders continue to advertise their 'faster' process. Because such lenders don’t rely on their reputation like banks do, it’s essential that you know exactly what you're getting yourself into in terms of the interest rate, repayment terms and fees. In summary, be careful, and make sure you understand how much you'll repay (and for how long) before agreeing to any loan offer.

How much can I borrow as a low earner?

Generally, how much you can borrow depends on your credit history and how much you earn, as well as a consideration of other debts and expenses you have. 

Are there alternatives to taking out an interest-charging low income loan?

Yes. You can apply for urgent assistance which may avoid the need for a loan altogether. The process may be unfamiliar to you, our Work and Income tips guide explains how to make sure you’re adequately prepared (and how to get what you need).

Beyond Work and Income, it’s a good idea to make an appointment with a Budget Advisor who offer free assistance to get your finances on track while you’re out of work. Budget Advisors work with many low income earners to help them make their money go further. Whatever your situation, a budget advisor will provide ongoing support.

Ten Low Income Loan Options (and What to Watch Out For)

You don't need to rush into taking out a low income loan. We believe there are many alternatives, including government support. We explain these below in detail. 

Important: Please do not rush reading this guide. We know a loan is your focus right now; this guide contains many options that can help you. We have put it together carefully for your benefit. Spending 5-10 minutes reading will help you make a sensible decision.

Hardship Assistance - Urgent Costs and Living Expense Assistance (from Work and Income)

Hardship Assistance is the term Work and Income use to describe emergency grants and one-off payments. 

Important: You don't need to be receiving a benefit to access one-off hardship and special needs grants to help you pay an essential or emergency cost.

When you apply for Hardship Assistance, Work and Income will also do an assessment to see if you qualify for Temporary Additional Support. 

The benefits of Work and Income assistance include no interest rate being charged, no loan fees, money can be advanced as a grant (i.e. not a loan) and you can avoid applying for a low income loan.

More details: Visit our dedicated Hardship Assistance guide and our Work and Income tips guide for maximising the chances of being approved.

Payday Loan (a high risk, high cost option)

Payday lenders are everywhere – on the TV, online, advertising on buses and newspapers. Anyone on a low income will likely struggle to manage repayments - all payday loans have high interest.

While the law has changed to protect low income borrowers, your repayments can still end up being twice what you borrowed. For example, if you borrow $500 for urgent car repairs, you will have to pay back $1,000 after a few months given the high-interest rates. Managing daily expenses with a low income is often difficult - having to repay a payday loan can be stressful. 

More details: Check out our Payday Loans Review and our video summary.

Microfinance loans and advances

A limited number of charitable ventures operate in New Zealand, offering interest-free loans for specific purposes, as well as debt relief. They are designed to help low income earners rebuild their financial situation. This means the loans they offer are designed to help you pay for essential items for your home or other things that you cannot pay for in a lump sum, such as clothes and furnishings. This Stuff.co.nz article explains the schemes available, and how they help low earners buy the things they need. 

There are a number of incredibly helpful community lenders who offer fee-free or low-interest loans to low income earners. We list these below:

1. The Salvation Army
With branches across New Zealand, the Salvation Army runs a Community Finance scheme which offers affordable loans for approved low income people. Each application is made via the Salvation Army's Community Finance centre, which then works with you throughout the life of your loan. The loans offered include:
  • No Interest Loan (NILS): Up to $1,000 for a maximum of 18 months. 
  • Low-interest StepUP loan: From $1,000 to $5,000 at 6.99% for a maximum of 36 months.

Website: The Salvation Army Low Income Loans
Available: Nationwide

2. Good Shepherd New Zealand is a non-government, not for profit organisation, working in partnership with the BNZ, Kiwibank and three community providers - Aviva Families, The Salvation Army, and Vaka Tautua. It offers fee-free loans to people with limited incomes; schemes include no-interest loans and the StepUP loans (with an interest rate of 6.99% p.a.). 
Website:  www.goodshepherd.org.nz. 
Available: Nationwide 

3. The Nga Tangata Microfinance Trust offers Asset Building and Debt Relief loans to help ease the burden of excessive debt. The debt relief loans are to a maximum of $3,000, with capital provided by KiwiBank. The applicant must pay back the loan in full within two years, and they must have been working with a budget advisor for at least six months.
Website: www.ngatangatamicrofinance.org.nz
Location: Nationwide ​​
Brochure: Download here

Sadly, demand is enormously high for these services and each charity is limited by the total money they have to lend. If you think you qualify and urgently need the help, it is a good idea to contact an organisation and apply sooner rather than later. 

​Secured and guarantor loans (a medium risk, low cost option)

Lenders don’t see the money you receive from Work and Income as ‘income’, but they will be more likely to offer loans if you have security or a guarantor (someone who will repay the loan if you don’t). Such loans are risky – if you pledge your security (be it a car, home or something else), failure to repay the loan means the lender will own what you pledged. If you’ve asked someone to guarantee a loan (usually a parent, friend or sibling), this can cause a whole lot of trouble if and when you miss a payment.

​Credit unions (a low risk, low cost option)

Low income earners often have successful loan applications with credit unions – First Credit Union and Unity Money are  some examples. Credit unions charge lower interest rates and protect low income borrowers with fair and transparent fees. In many cases, a credit union can also offer repayment plans and more flexible loans.

Read our reviews here: First Credit Union and Unity Money

​Talk to your bank (a low risk, low cost option)

COVID-19 changed everything, and banks have some responsibility to help low income earners who are unable to repay debt. If you owe money on credit cards or personal loans, ask about a hardship application. As a low income earner, a hardship application asks your bank to help you work out a more flexible repayment plan while your prioritise urgent payments.

Use a credit card (a low risk, medium cost option)

If you already have a credit card and you have still not maxed it out, credit card debt is very likely to be cheaper than taking out a new loan. You’ll have to meet the minimum repayments (find out what your bank charges here) – it will either be 2%, 3% or 5% of the balance each month).

Low income earners are, generally, best to consider a low-interest credit card. Many credit cards don't charge fees, which makes them even more affordable. The best approach is to request a low limit ($500 or $1,000) and ensure you make monthly repayments (even if you can't pay off the balance in full). The interest rate and low fees is likely to cost far less than any personal loan.

More details: Visit our low-interest credit cards comparison.

KiwiSaver withdrawal (for anyone with a low income and in financial hardship)

If you have a KiwiSaver balance, you may be able to access it for free. You will need to prove that you cannot meet your 'minimum living expenses', for example basic food and grocery items, and accommodation costs (including rent, mortgage repayments, interest etc), among other expenses. Low income earners enrolled and contributing to KiwiSaver often have a balance in excess of over $5,000 which can be distributed by the scheme's trustee should you meet the requirements. 

Best of all, you won't need to take a loan and the money comes in a matter of weeks once approved. You'll need to submit a hardship application, and supply the required evidence.

More details: KiwiSaver hardship application

Borrowing from friends and family (medium risk, low cost)

Depending on your family situation, this can be an option to get a helping hand while you reorganise your finances. However, asking for a loan from loved ones has risks - if you can't repay, you can lose friends and upset people. But, for many people, it works just fine. How much to ask for and who to ask is something that needs a bit of consideration.

More details: Our guide to lending money to friends and family members is written the view of the lender (i.e. person you ask for money), but it has some very useful information. 

Loans from door sellers and trucks (a high risk, high cost option)

​Anyone who offers you a loan on your doorstep is likely to be trouble. It sounds good – a lump sum and a repayment-free period, but the costs quickly get out of control. The interest rates and fees will be high, and the lender does not have your best interests at heart. Worst still, someone will visit your home every week or so to collect payment. It’s ugly and can very stressful if you struggle to make the repayments.

Conclusion: The Best Loans for Low Income Earners

  • When it comes to taking out a loan, don't rush into a decision. Payday loan providers advertise everywhere and are all too willing to lend, but it comes at a big cost even if the law limits the interest costs.
  • Work and Income offers a number of special assistance loans and grants - our hardship, living costs and emergency assistance grants guide should be considered first as it walks you through everything you need to know about what's available and how to apply.
  • A credit union is usually the best place to start - making an appointment with a local branch will help you explore options. The best way to find one is to Google 'credit union' and your location.
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