Personal Loans

Get a personal loan up to $70,000 from 6.99%

Updated 5 April 2019

Personal Loans Summary

Personal Loans are available generally for amounts up to $70,000 - but the interest rates charged vary wildly; the better your credit score, credit history and overall loan affordability, the better deal you'll get.
Peer-to-Peer lenders such as Harmoney, Squirrel Money and Lending Crowd offer an alternative to traditional banks and finance companies; they only operate online and can beat banks for borrowers with good credit.
Credit cards may be a suitable alternative for loans up to $5,000-$7,500, and you may be able to transfer what you "borrow" from the credit card to a 0% interest balance transfer deal. This way you'll avoid interest costs, loan application fees and be debt free faster.
If you are looking to take out a loan for a purchase, providers such as the Q Card and GEM Visa can offer long-term financing at 0% interest rates with minimal fees.
If you are sure a personal loan is right for you, don't sign up with the first personal loan offer you receive - shop around, as the market is competitive and deals vary.
For anyone needing a personal loan, a number of peer-to-peer lenders offer unsecured loans from 6.99%, leaving most bank interest rates (10%+) in the dust. There is lots of competition in the market meaning getting a good deal is now a lot easier.
Borrowing is a serious decision and needs to be carefully planned and budgeted for. This step-by-step guide outlines everything you need to know about getting a personal loan and gives tips to make it as cheap and stress-free as possible.
As this is the first version of this guide, if you have anything to contribute to this personal loans guide, please contact us - we'd be very happy to hear from you.

Our guide to Personal Loans covers:

What is a Personal Loan?

A personal loan is a loan that you pay back over a set period of time on a periodic basis, i.e. you borrow $5,000 and pay it back every month for 2 years. The lender charges you interest on the $5,000, as well as a one-off fee, and you repay both the money you borrowed as well as the interest. Personal loans are popular, easy to obtain and offer convenience for many New Zealanders.

The advantage of a personal loan is that you have access to money immediately while spreading the repayment over a period that suits your budget, be that weeks, months or years.

This guide highlights the cheapest personal loans available, their pros and cons, as well as looking at other finance options such as credit cards and overdrafts which may cost you less.

Personal Loans - 7 Must-Know Facts

Who gets a personal loan? What Can I Use a Personal Loan For?

New Zealanders from all walks of life apply for personal loans every day. The most popular reasons include debt consolidation, big one-time expenses such as weddings or funerals, as well as urgent money needs such as car repairs, medical bills or children expenses. But there are thousands of other reasons people get personal loans, and if you meet the criteria and get approved, you are free to spend the money on what you want to such as home renovation and holidays.

What is a secured loan? What is an unsecured loan? What’s the difference?

A secured loan is a loan where the borrower pledges some asset (e.g. a car) to the lender as collateral for the loan. Should the borrower be unable to repay the loan, the lender can take possession of the asset (i.e. by repossessing the car).
An unsecured loan is a loan where there is no security, so the lender takes a greater risk that they will be repaid. Unsecured loans include credit cards and student loans.
The difference is between the loans is mostly the interest rate. A secured loan is seen to be less risky for the lender, so often (but not always) there is a lower interest rate compared to an unsecured loan.

How much can I borrow? When do I need to repay it?

Most banks have a minimum borrowing amount, which is around $2,000. Because personal loans are flexible, there is no maximum amount you can borrow nor a date you need to pay it all back by. Lenders take into account your income, credit history and savings levels among other things when they assess your ability to repay a personal loan. In doing so, they will also determine a range of suitable repayment terms.

Our Tip: To have a happy borrowing experience, borrow as little as you need and repay it as quickly as possible. This limits the interest you pay on the loan.

Caution – while borrowing over a longer period means lower monthly repayments, it massively increases the amount of interest you will repay overall. For example, borrow $10,000 at 15% over two years and the interest cost is $1,600. Borrowing the same over 5 years and it’s $4,300!

What is "repayment insurance" and do I need it?

Repayment insurance is a policy that covers the repayment of your loan if you have an illness, redundancy or other qualifying situations. You'll pay a premium on top of your loan repayments, usually a % of your overall balance outstanding. i.e. 0.5% of your loan balance, paid monthly.

Some lenders may offer repayment insurance to cover you for specific changes in circumstance, so it’s worthwhile asking about that and making sure the policy provides a suitable level of cover. Merely repaying the loan for a limited number of months won't help you - challenge the lender to prove why you need it, and be sure to understand all the benefits.

Will a personal loan affect my credit rating? What happens if I can’t repay my personal loan?

If you repay your loan on time, then a personal loan will improve your credit rating as you are proven to be able to meet debt obligations. If you are late in paying or fail to repay your loan, your credit rating will suffer. Our credit score and credit check guide outlines everything you need to know.
Under the Credit Contracts and Consumer Finance Act, you can make a “hardship application” if your circumstances have changed significantly and prevent you from repaying your loan. This is relevant if you fall ill or lose your job. However, you must do this as soon as possible. Otherwise, the bank will see an unpaid balance and start collections.

If your loan is secured, then the lender will take legal action to take possession of the asset. In such cases, this will involve a repossession.
If your loan is unsecured, the lender will likely pass your debt on to a debt collector, who will chase the debt with personal visits to your home and/or workplace, repetitive phone calls, letters and email reminders.

Top Tip: Don’t take out a loan you can’t repay. Any late payment, even one day late, will hurt your credit score and make getting loans or other credit later on harder.

Understand the ins and outs of "fixed monthly payments"

A personal loan differs from a mortgage loan or student loan. It allows you to borrow a specific amount over a fixed period of time, usually 2-5 years, at a fixed interest rate. This differs from other bank credit like overdrafts and credit cards, and it can be unsecured (i.e. no collateral required) or secured (i.e. the loan is secured over a car or other personal property).

To outline how a personal loan works, take this example:

Mike borrows $10,000, to be repaid over two years at 10%. Mike knows at the start of the loan what he needs to repay each month, meaning he can budget accordingly.
Mike will also know the total cost of the loan (i.e. $10,000 + all interest charges) so he can compare the offer between other banks and finance companies.

Loan Fees are added on top of your loan amount

All Kiwi lenders charge a fee for setting up a personal loan, ranging from $100 to as much as $750, and possibly higher. Additionally, there may be “early repayment fees” which are charged if you pay back the loan before its due.

Personal Loan Alternatives

You may not need to apply for a personal loan if other (cheaper) options are available. We outline the potential to use a credit card, balance transfer offer and/or a loan for an employer below. Any of these alternatives have the potential to significantly beat the fees and interest charges incurred by a Personal Loan.

1. Credit Card Alternative - is a credit card or long term finance card better than a loan?

The answer is “it depends”.
If you need a small amount of money and could pay it back in a number of days, then a credit card is probably better than a personal loan. You can withdraw the money from an ATM and pay it back once you are able to, minimising the interest charged. However, if you need a reasonable amount of money (say $10,000+) which will take some time to pay back, then a personal loan is likely to be more suitable.
For loans of less than $10,000, many cheap credit cards undercut the cheapest loans, so using a credit card to finance your loan should be a priority.
If you are looking to make a purchase, look at long-term finance deals, as out guides to GEM Visa and Q Card explain. Many retailers offer 6-24 months interest-free, which automatically beat the banks and other lenders. But you'll need to pay it back BEFORE the interest-free period ends to avoid astronomically high 25%+ p.a. interest rates.
A number of New Zealand banks offer 0% interest balance transfer credit cards. The process is simple – apply for a new card with a bank you don’t currently have a credit card with, and once approved you can transfer your existing credit card debt to the new card paying 0% interest. The offers usually last for 12 months, and if you are still struggling to pay off the balance, you can organise a further balance transfer with another bank.

2. Balance Transfer Alternative - Using a 0% balance transfer card proactively

Example:

Alice needs to pay for her wedding reception and honeymoon six months before her wedding, at a cost of around $5,000.
Alice applies for a new credit card with her existing bank (Bank 1), and once approved she charges these expenses to her new card. Knowing she cannot repay the $5,000 the following month, Alice applies for a balance transfer with Bank 2 and is approved.
Alice agrees to repay 2% of the balance every month (standard terms) and is charged 0% interest for 12 months.
A few months after her wedding, Alice has enough money saved to repay the Bank 2 credit card and transfers the amount owing. The debt is cleared after 12 months.

Summary:

Total cost of debt: $0 + $35 credit card fee (Bank 2)
Total cost had Alice used a personal loan: Using the best interest rate (14.95%), interest of $412 and a $250 application fee would be charged (total $652) as well as the obligation for monthly repayments of around $450.
Know this: A credit card balance only works when you need a loan for something you can purchase with a credit card. Some retailers don’t, and many personal loans involve non-retail transactions (car loans, mortgage repayments etc). Still, in many cases, a personal loan won’t be the cheapest option.
Visit our balance transfer credit card guide, which has the latest offers from Kiwibank, Westpac, BNZ, ASB and more.
Our Personal Loans Best Buy Guide below gives the best answer for your specific needs.

Tip: Pay off a Personal Loan with 0% interest - Using a Credit Card with a Balance Transfer Offer
There is a way to avoid interest altogether on loans by withdrawing money on a credit card, paying off a personal loan with the money, and applying for a 0% interest balance transfer credit card. Currently, Westpac, BNZ and ASB offer such cards, and if you're successful, you'll pay no interest for at least 6 months. But as with any financial decision, you will need to be careful to avoid any problems. Our suggestion to navigate the process is as followed:

Apply for a low-fee credit card with your current bank with a limit above your existing personal loan balance
If approved, you can then contact a second bank (BNZ, ASB or Westpac, whoever you don't bank with now) and ask the bank about whether you'll be approved for a balance transfer credit. It is best to do this BEFORE advancing cash on your new credit card - you can usually get a balance transfer of up to 90-95% of your approved credit limit, so check with the bank first to be clear.
Once you have received an understanding that you will qualify for a balance transfer, login to your internet banking (if you have your credit card listed beside your current account) and transfer the money from the credit card to the bank account, and then transfer that money to your personal loan provider. You've just paid off the personal loan and minimised interest charges.
Apply for the balance transfer credit card with a second bank, once approved, you've got 6-12 months to pay down the debt at 0% interest. You may be charged a transfer fee (1-3%) but often not.

Our guide to balance transfer credit cards covers all details on the current offers. Remember, you can't a balance transfer card if you are an existing customer (i.e. if you're with BNZ, apply for a balance transfer card with Westpac and vice versa).

3. Employer Alternative - Can I get a loan from my employer?

The answer is “possibly, but you’ll need to ask”. If the answer is no, they may provide salary in advance. Talk to your employer – these loans will be the cheapest you can get.

Best Buy Personal Loans

Loan Size	Cheapest Personal Loans Lender and representative interest rates for borrowing over 1-5 years (unless stated)
$3,000 to $9,999	*Secured Loans* NZCU Baywide (from) 8.90% p.a. with a one-off $250 fee The Co-operative Bank (from) 6.99% p.a. with a one-off $200 fee TSB Bank 12.95% p.a. with a one-off $150 fee Unsecured Loans Harmoney from 6.99% p.a with a one-off $200 or $450 (loan > $5,000) fee Squirrel Money from 7.95% p.a with a one-off $250 fee* NZCU Baywide (from) 11.90% p.a. with a one-off $200 fee
$10,000 to $50,000	Secured Loans NZCU Baywide (from) 8.90% p.a. with a one-off $250 fee The Co-operative Bank (from) 6.99% p.a. with a one-off $200 fee TSB Bank 12.95% p.a. with a one-off $150 fee Unsecured Loans Harmoney from 6.99% p.a with a one-off $450 fee^ Squirrel Money from 7.95% p.a with a one-off $250 fee* NZCU Baywide (from) 11.90% p.a. with a one-off $200 fee

^Harmoney and *Squirrel Money are peer to peer lending platforms - please read our dedicated Harmoney review and Squirrel Money guides for information about borrowing.

Personal Loans - Our Thoughts

Credit cards are the best place to start for urgent expenses, and balance transfers are excellent for special purpose spending.
If your purchase is retail, consider using a long-term finance option such as Q Card or GEM Visa with a retailer who is offering a long-term interest-free deal.
If your credit card doesn’t suffice, consider an employer loan.
Failing that, if you are prepared to try a new method of lending, Harmoney is the best peer-to-peer on lender on offer given its size.
Beyond Harmoney, NZCU and TSB offer attractive application fees and the lowest interest rates for both secured and unsecured loans.
Remember, borrowing for a shorter period saves you hundreds if not thousands in interest costs. Use an online loan calculator to see the difference.
Do not rush into getting a personal loan until the purpose or need has settled.
If you do struggle with repayments, any late payment or default will be added to your credit report and ultimately affect your credit score.