Payday Loans Review & Guide

Payday loans, Cash Advances and Quick Loans are a last resort and should otherwise be avoided at all costs

Updated 2 November 2019

If you have landed on this page, please visit our other pages on alternative financing – personal loans and low-interest credit cards.

Payday Loans - A Warning

We take the view that a Payday loan must only be taken out as a last resort.
If you need cash now and you are SURE you can repay the loan, a Payday loan is one solution.
If you are uncertain about whether or not you can repay, Payday lenders will smash you with fees and penalties.
An urgent $500 loan can turn into a $2,000 nightmare.
In short, only borrow if you know you can repay.

Payday Loans Summary

Interest rates start at around 1% per day, but many lenders go higher
Fees and administration costs add up - and some lenders charge a fee for every direct debit payment
There is no regulation of Payday lending in New Zealand, meaning there is little protection from sky-high fees and interest rates.
Alternatives to payday loans exist, and should be considered before the trigger is pulled on a payday loan application.
Payday loan applications will show up on a credit report, meaning any further lenders will see that you needed fast cash.

Do you still want a Payday loan?

We've put together a helpful guide to let you compare the different lenders in the market. Our guide shows the “APR” (annual percentage rate, i.e. the interest rate), late fees and three examples of regular cash loans taken by other New Zealanders and the costs involved in repayment.

Our guide covers:

How to pick a Payday lender that is best for your needs?

Find the cheapest price for your Payday loan

Interest rates and default fees vary a lot in New Zealand. The lowest interest rate charged by one company is close to DOUBLE the interest rate charged by another. On average, you pay $45 for every $100 borrowed in fees and interest. Fees are largely consistent across Payday lenders, so finding the best interest rate will help you save a lot of money.

When comparing, make sure you know:

The exact date you plan to repay the Payday loan - the longer the term, the higher the cost.
What $ total you will repay if you repay on time at the date you expect to make full repayment
The late repayment fees and late payment interest rate if you cannot pay. This is equally important, as the penalties can be hard to repay once incurred.

AVOID Payday loan Brokers

Unless it’s a company mentioned in this page, there is a chance it is a broker, a middle-man, who looks like a Payday lender but will only send your details to lenders once you make an application, and earn a fee from you or the lender, or both. These businesses have no purpose other than to charge you more than you need to pay, and are best avoided.

Check the company is operating and can pay on the same day

Kiwi Payday loan providers have a history of being flaky or closing down overnight. What you see online may no longer be what is available. Avoid the hassle, uncertainty and anxiety by giving a lender a call to make sure they’re operating. All of those in our list are active and lending.

What information do I need to be able to apply for a Payday loan?

Generally you need to fulfill the following requirements to qualify for a short-term loan:

Be at least 18 years of age, living in New Zealand
Receive an after-tax income above $350-$400 per week, and be in permanent employment (as an employee). Your employer may be contacted to verify your employment. However, Payday lenders do not disclose the nature of the loan.
A proof of address, like a bank statement or utility bill.
You need a bank account, and your income needs to be shown to be deposited into that bank account.
You need a mobile phone and email address
You can receive a payday loan if you also receive a benefit, but you must still meet minimum weekly income thresholds.

The "Top 3" "Least Worst" Payday Loans

We don’t agree with Payday loan practices and their high-interest and fees, so for that reason we have called the least expensive lenders the “least worst”.
New Zealand, unlike the UK and USA, has no law against what interest rates Payday lenders can charge you.
We’ve done our best to make it clear what fees you will pay and how to reduce your overall Payday loan cost.
We outline everything you need to know about fees, interest rates, repayment problems and what to do if you think you've been taken advantage of by a Payday lender.

Our “least worst” Payday lenders are ordered from lowest to highest annual interest rate, indicating affordability.

Annual interest rate: 361.35%

Total repayment for $500 borrowed for 2 weeks: $613.16
Total repayment for $500 borrowed for 4 weeks: $685.93
Total repayment for $1,000 borrowed for 2 weeks: Not permitted, maximum loan is $500
Failed Payment/Default Fees: $30

Annual interest rate: 200% + Establishment Fee: $86

Total repayment for $500 borrowed for 2 weeks: $643.78
Total repayment for $500 borrowed for 4 weeks: $694.11
Total repayment for $1,000 borrowed for 2 weeks: Not permitted, maximum loan is $600
Failed Payment/Default Fees: $10

Annual interest rate: 167.9% to 438% + Establishment fee: $25 to $46

Total repayment for $500 borrowed for 2 weeks: Up to $694.76
Total repayment for $500 borrowed for 4 weeks: Up to $736.00
Total repayment for $1,000 borrowed for 2 weeks: Up to $1,277.48
Failed Payment/Default Fees: $40~$50 per week

Other Payday lenders and their annual interest rates

Paydayloan.co.nz: 511% to 693.5%
Savemybacon.co.nz: 547.5% (read our review)
Moola.co.nz: 620.50% (short term only, 2-44 days, loans between $100 to $1,000) (read our review)
Cashburst.co.nz: 511% to 693.5%
Paydayadvance.co.nz: 511% to 693.5%

Know this:

We have not linked any Payday lenders to this website as our view towards them is very negative, and
We do believe there are alternatives to Payday loans.
Our presentation of loan repayment calculations is for illustrative purposes only.

Important Information about Payday Loans

1. Fees and Interest costs

The interest rates charged will vary hugely at any moment, and we recommend shopping around for a Payday loan.
The more regular repayments you can make, the cheaper your loan will be. Making 4 payments of $100 each week is going to decrease your outstanding loan and therefore incur much less interest expense than making a payment of $400 at the end of the month.
Lenders commonly charge around $40 if you pay late. Additionally, some lenders charge a late payment penalty interest rate of 0.25%-0.5% per day for the loan balance owed.

Specifically:

The higher the APR, the more expensive the loan is.
“Total repayment” is the original loan amount, interest costs and fees applied for a single payment made at the END of the term (2 or 4 weeks as stated).
“Early Repayment” means you are allowed to repay early, therefore saving you money.

While we normally rank the best options on price, we considered many factors, including:

Interest rate
Fees (initial and default)
Membership of the Financial Services Complaints Ltd body is preferred, but as Payday lending is largely unregulated non-membership is standard
Limit of loans to $1,000
Credit check – we favour lenders who check to make sure a Payday loan is affordable before saying yes.

2. What happens if I can’t repay a Payday loan?

All Payday lenders are prepared for this situation and offer solutions to help you. You'll need to follow everything through from your end to have the best shot at being helped out.

Firstly, contact your lender as soon as possible and be honest with them about the fact you are unlikely to be in a financial position to repay. You will be given the option to adjust the repayments to best suit your cashflows. Be aware that the longer the repayment term, the more interest charges you will have to pay.

If you have suffered illness, injury, loss of employment, the end of a relationship, or any other reasonable cause to be unable to make payments since taking the loan, you can apply under financial hardship with your lender. Lenders offer loan repayment holidays and/or interest caps when their conditions are met.

If you do not contact your lender and do not make payments, you will be chased and billed for the chasing, ranging from $10 per letter sent to $500 for a court order. Non-payment has the potential to cause a lot of hassle.

3. If you feel as if you’ve been misled or taken advantage of...

You can take your lender to the (free) Financial Ombudsman Service which can adjudicate. Before you do that, you must complain to the lender first. If you are not satisfied with their response, take your case to the Ombudsman. You'll need to have all records of your dealings whereby it will be assessed and either be heard or rejected.

Help if you've already got a payday loan

If you have an existing Payday loan, there are many ways to get your finances back on track and avoid those type of loans in the future. Please read the suggestions below – all have been proven to help bring down debt-dependence and lower the risk of needing to get another Payday loan.

Use any existing credit card to the max

Find out what your limit is, and use it to the maximum for your “normal” monthly spending. When it comes to paying the bill, we recommend paying the minimum payment (often around 5% of the balance owed) as an alternative to letting it default. While you’ll pay interest, standard credit card interest is rarely more than 25% per annum, or 1/20 of what a Payday lender will charge you! With the spare money you have from using your credit card, pay off the Payday loan.

Have available balance on your credit card? Consider a cash withdrawal

The fees and interest charged on a credit card cash withdrawal are tiny compared to a Payday loan. While withdrawing cash from a credit card is never ideal, it works well to pay down a Payday loan. Even if it’s $100 or $200, sending that to your Payday loan lender will save you much more in the long run.

Increase your credit card credit limit

As credit cards provide cheaper money than Payday lenders, call your bank or credit card provider and see if you can increase it. Small increases can sometimes be done through internet banking. You can then make a cash withdrawal and pay off the Payday loan.

Get a 0% balance transfer credit card

With many banks offering 0% interest rates on credit card balance transfers, apply for a balance transfer on your credit card and shuffle your debt to an 'interest-free' arrangement. You’ll get 6-12 months to chip away at the payments without incurring in fees. This is the cheapest personal debt you can get. Use the money you would have needed to pay off the credit card to pay off the Payday loan. Our guide to balance transfer credit cards has everything you need to know.

Look at a personal loan

If the credit card option isn’t suitable, consider a personal loan. The interest rate is much lower than a Payday loan (20% vs 600%!) and you have more flexibility with the repayments. Personal loans may take more time to organise, but they provide money to help you get yourself back on your feet. The first thing to do is pay off the Payday loan. Don't think that because you have a Payday loan, you would be unable to get a personal loan. Check your credit score and approach a lender, explaining your situation and why you can repay the personal loan.

Borrow from family, not friends

We don’t recommend borrowing from friends for many reasons. Family is easier, and readers tell us that the order of asking should start with siblings, then cousins, then parents. Talking about your money problems with family members may also offload some worry from your mind. If a family member is prepared to help you out, write down the amount and when it will be repaid. Use their money to repay the Payday loan.

When it comes to repayments, make sure you make them! It gets ugly if you stop paying or communicating once you have their money. Be upfront if you can’t make a repayment, but at least offer them something, even if it’s $20 or $50. Your family will respect you.

Increase your bank account overdraft

Our overdraft fees page sets out what banks charge for providing an overdraft. The fees can be high, but again it’s cheaper overall and less aggressive than a Payday loan which can be paid off once the overdraft limit increase is approved.

Our 2 Cents on Payday loans

We don’t like Payday loans at all. Unlike Australia, the USA and the UK, New Zealand has little regulation to cover Payday lenders and borrowers. For example, Payday lenders do not have to display their interest rate on their website or marketing materials. We find this unacceptable.

We know from our reader comments that a growing number of Kiwis are repeatedly relying on Payday loans. We keep this page up to date to show the best value lenders on offer, as well as a list of proven suggestions to break the reliance on high-interest loans. We are in the process of lobbying the government for the following changes:

Make it mandatory to show interest rates so borrowers can compare and make informed decisions about each lender
Cap the loan, fees and interest repayments to TWICE what was originally borrowed, avoiding hardship situations which see a $1,000 loan turn into a $4,000 nightmare.
Scrap default interest rates, which are aggressive and unnecessary
Credit checks for all applications – Payday lenders must only lend to people who actually have the income to repay.

Alternatives do exist
Remember, before you decide to get a Payday loan, there are alternatives. Have a look at our personal loans guide and low-interest credit card guide.