Getting a Great Personal Loan in New Zealand

wisert

4 years ago

In today’s digital world it’s easier than ever to find a loan. Gone are the days of walking into the nearest bank and negotiating with a sales representative. Instead, there are countless banks and other lenders online all competing for clients. This has created an environment where there are some truly great loans with reasonable interest rates, easy online applications, and quick delivery of funds.

Watch Out for Hidden Fees

One of the most important things to pay attention to when you’re deciding what lender to use is hidden fees. For example, many lenders impose a large fee once you’ve successfully been approved for a loan. These fees can have a number of names, such as ‘initiation fee’ ‘processing fee’ ‘approval fee’ ‘origination fee’ and more. In some cases, it may seem like you are getting a cheaper loan from one provider, but after the big initiation fee it ends up being a worse deal.¹

Some lenders also have a smaller monthly administration or service fee that comes with the loan. This is usually a small monthly fee that is required to be paid for the life of the loan. Although these fees aren’t too large, they can certainly add up.

Just because a lender charges extra fees doesn’t mean they are a bad company to use. It’s just important to keep these fees in mind when you’re comparing the total costs of different providers.

Interest Rates

Another huge factor to consider when taking out a loan is the interest rate, often known as the “APR” or Annual Percentage Rate. This is a figure that represents the percentage of interest you’ll pay on the balance of the loan each year. Naturally, the lower the interest rate or APR, the better.²

Typically, no bank or lender offers the same interest rate to everyone. The interest rate you are provided can depend on the size of the loan taken, the duration of the loan payback period, and your own financial history.

Generally, the lowest interest rates are offered for the biggest loans, the longest payback periods, and to people with great financial histories. However, it’s still possible to get a decent interest rate if you don’t fit this criteria. This is just the way to get the absolute best possible rate.

The Application Process

Fortunately, it’s common for most lenders to offer completely online applications. In most cases there’s no need to have to physically go anywhere to be approved for and receive a loan. Sometimes, you’ll have to mail in some signed documents but even this usually happens digitally now.

However, the requirements to apply for a loan with each lender vary significantly. Some lenders will require a minimum income and no bad financial history while some will not accept self-employed individuals or people on a pension. Other lenders will have none of these requirements.³

The specific documents required will also vary but you’ll tend to need some form of ID, bank statements and/or proof of address, and occasionally proof of income.

Types of Loans

It’s important to note that there are easy ways to get loans with much lower interest rates. For example, secured loans are loans backed by some form of collateral, often a home or car. These loans tend to have much lower interest rates than unsecured loans, since if you can’t pay the loan the lender is able to take possession of your collateral.⁴

Many people will not be comfortable with the idea of a secured loan, but if you are, it’s definitely something you’ll want to look for with your lender. It’s an easy way to take out a much cheaper loan.

If you are specifically looking for a loan to buy a house or car, interest rates on these loans also tend to be cheaper. That’s because these tend to be longer term loans that often require a deposit, and typically the car or house you buy with the loan is used as collateral as well.⁵

Where to Find Great Lenders

The best way to find a great lender is to look online. Not only does the internet provide far more options, but the extra competition forces online lenders to offer the best terms they can. It’s also much easier to compare different providers online. In many cases, it might make sense to apply for multiple lenders and accept the one that approves you with the best terms and the lowest interest rates.

Just remember, doing your own research is critical. You’ll want to make sure the lender you ultimately decide on has good reviews and provides attractive interest rates and favourable terms. One of the best ways to start on this journey is to do a simple online search. This will quickly show you some of the major lenders in your country so you can begin the process of finding the best lender for your situation.