Loans in New Zealand in 2019

• https://www.consumer.org.nz/
  This website is created for all Consumers and here you can find information on consumer rights and protection as well as useful information on financial products and borrowers rights.
• https://www.consumerprotection.govt.nz/
  This website is provided by the Government of New-Zealand and here you can find information and tips on financial products such as loans.

• https://www.consumerprotection.govt.nz/help-product-service/
  Here you can find information on debt collection, debt counseling and useful tips.
• https://www.consumerprotection.govt.nz/
  This website is provided by the Commerce Commission New Zealand and here you can find information on credit contracts and Consumer Finance Act.

Before you borrow

Before you borrow money you should ask yourself whether you really need to spend the money and whether you can afford to pay back the money you're planning to borrow. Before borrowing ask yourself:

• Can the purchase wait until I can afford it without taking a loan?
• If the purchase is urgent is there another way I can get it? For example, ask employer for money advance, borrowing from family or friends.
• If the purchase is not urgent can I save up money?

You should never take a loan if:

• You want to take a loan to pay off other loans;
• You already have one or more loans;
• You already have other outstanding debts and/or missed payments;
• If you are not sure of your capability to pay the loan back on time.

Some loans have variable interest rates, which means that interest rate can increase or decrease. You shouldn't take this type of loan in case you feel that you won't able to repay the loan if interest goes up.

If you still feel the need to take
a loan you should pay attention to:

Look at your income and outgoings and think if you'll be able to pay all your bills and debts. Calculate how much you can afford to repay each month. If your budget shows that you'll have no money for extra payments then it means you can't afford to take a loan.

Don't accept first loan you're offered, compare various lenders to make sure you get the best possible loan offer!

Borrowing costs and fees

• Application fee: some lenders may ask you to pay this fees when setting up your loan.
• Refund Fee: this fee can be charged if you overpay your lender and they have to refund overpaid amount of money back to you.
• Monthly loan administration fee: some lenders may ask you to pay monthly loan administration fee.
• Early loan repayment fee: You may be asked to pay this fee if you decide to pay-out your loan early. This fee is calculated according to how much you still owe to your lender and for how long.
• Late payment charges: if you miss a payment you usually have to pay late payment charge, so make sure you never miss a payment to avoid extra charges, also please note that this can also affect your credit score, which can make it harder to borrow money in the future.
• Legal fees: if you don't pay back your loan, your lender can go to court to recover the owed money, in such cases you will be asked to cover these expenses.

If you're not able to pay back loan on time

• Loan extension: If you realize that you will not be able to repay the loan on time, there is a service of loan repayment period extension, which is offered by many companies for an additional cost. Every credit company sets the fee for the service of extending repayment period itself.
• Credit holidays: the delay of loan payments for a certain amount of time is called credit holidays. Credit holidays are available in some cases, such as a temporary loss of working ability or loss of job. In most cases credit holidays are granted for a period from one month to one year. This is common for longer-term loans.

Credit refusal. All credit institutions have their own criteria to accept or refuse a credit. Each organization has developed calculation rules to determine in advance if you have a risk of ending up in litigation. They use scoring methods. This calculation takes into account many factors such as age, bank, educational level, number of children, occupation and budget. Your application can be accepted by one bank and denied by another. Your banker may refuse your request because it determines your debt ratio is too high. Every lender has its own budget criteria.

Types of personal loans

• Secured - tied to an asset (like a car or boat) which is used as collateral if you fail to make your repayments.
• Unsecured - not tied to an asset and therefore offers no security to the bank if you are unable to make repayments.
• Overdraft/ line of credit - this is a personal loan with a difference. Similar to a credit card, the borrower can spend up to an agreed limit, and just pays interest on the outstanding balance each month. Unlike normal personal loans, there is no requirement to pay in full by a certain date.

If a loan is secured this means that it will be tied to an asset, which can be repossessed if you fail to make your repayments. Unsecured loans are collateral free and therefore tend to have higher interest rates.

Unlike other forms of finance, such as a credit card, personal loans are generally cheaper as on average they have lower interest rates and have the requirement to pay it back in a set period.

How to choose the best loan for you?

• Loan simulation: Loan simulation on lenders websites show the differences between offers, in terms of monthly payments and also the total cost to pay. In any case we recommend you to make a credit simulation on 2 or 3 websites that suit you and only then make your online application. If you hesitate between several offers, make several credit applications to receive offers. This will allow you to compare the contracts.
• APR: Annual Percentage Rate represents an annual cost (in %) of borrowing. The APR include factors such as interest rate and certain other fees and charges into account. In order to make it easier for you to compare one loan to other similar loans, lenders are required to tell you their APR before you sign an agreement.
• The application fee: The records of expenses are very different from one institution to another. High records charges may hide behind a low APR. Up to 1% of the credit amount, expenses records are reasonable.
• The total cost of credit: The total cost is the first item to check for comparing credit offers. This is the amount you will pay in the end. This amount includes interest, possible administrative costs or insurance.