Personal Loans in New Zealand

The loan amount is then repaid over the term of the loan, which is often up to seven years. The repayment amounts generally include interest charges expressed as an interest rate so you pay back more than you initially borrowed. 

What can I use a personal loan for?

There are many reasons why personal loans are used. A few of those reasons include:

• Debt consolidation 
• Emergency purchases
• Purchasing a car
• Holiday expenses
• Home renovations
• Wedding costs

Types of personal loans

Because there are so many different reasons why people use personal loans, there are different types of personal loans to suit people's individual needs. 

• Secured personal loan. The borrower offers an asset to use as collateral in the event they default on their loan. The rates are often less than unsecured loans because the secured asset provides protection to the lender. 
• Unsecured personal loan. A sum of money is loaned to the borrower with no asset used as security. This poses more risk to the lender so the rates are often reflective of this. 
• Car loans. For the specific purpose of purchasing a car. The vehicle bought is used as collateral. 
• Debt consolidation. A personal loan to replace multiple higher interest bearing loans such as credit cards. Loans are combined into one consolidation loan to save money on interest charges. 
• Payday or short term. Available to bridge gaps in your short term cashflow, you are generally able to borrow up to $2,000 for up to one year. Fees and charges can be very high. Bad credit loans are available.
• Line of credit. You are preapproved for a credit limit and then you can spent up to your limit as needed. Interest is only charged on the portion used. 
• Overdraft. When your everyday account reaches zero, an overdraft allows you to continue spending with credit.

Features of personal loans

When choosing a personal loan, its important to understand and choose features that suit your needs. 

• Loan term. The term is the amount of time you have to pay off your credit. This varies greatly among different types of loans.  The repayment terms often range from one year up to seven years. A longer term means the monthly repayments will be lower but the overall amount you’re charged in interest will be higher than a shorter term. 
• Interest rates. It can be overwhelming to be faced with so many different types of loans but this ensures the interest rates stay competitive. Interest rates can be fixed or variable. Fixed rates do not change and variable rates can rise or fall at the lender's discretion. 
• Fees and charges. In addition to the interest rates, most loans have fees and charges. Commonly referred to as application fees and monthly account fees, these need to be taken into consideration when choosing a loan. 
• Repayment flexibility. Making extra repayments and paying off a loan early can save a lot of money in interest charges. This is a good feature to look out for if you're wanting flexibility with your repayments. 
• Comparison rate. This rate takes into account the interest rate as well as all fees and charges and is expressed as a percentage of a hypothetical loan amount. Because the comparison rate takes into account all fees, it will be higher than the interest rate. If the interest rate and the comparison rate on a product are equal, it means the loan does not have any fees or charges in addition to the interest rate. 

You are spoiled for choice when it comes to choosing a loan so be sure to check that the features of a loan suit your needs. The cheapest option might not always be best if it doesn’t include the features you are wanting.