The impact of the global pandemic has been far-reaching, and many of us are now struggling to make ends meet. Due to the slow economic activity in Aotearoa, many New Zealanders are struggling with financial hardship.
According to a report by the Commission for Financial Capability, one in four New Zealanders lives under financial stress. Now, to cope with the current situation, people are turning to personal loans to make ends meet.
But is it really worth it? Before you take out a loan, it’s important to understand the potential risks and benefits. Read on for our top tips on choosing the right personal loan in NZ.
1. Do your research
The first step is to do your research and understand the different types of personal loans available.
There are secured and unsecured loans, fixed and variable interest rates, and different repayment terms. It’s important to compare different loans to find the best one that suits your needs.
You may or may not have an asset to use as collateral for a secured loan, which will also affect your decision. Besides, make sure you compare the interest rates and fees of different lenders before you apply.
Perhaps, you may also try connecting with a reliable financial advisor to get unbiased help selecting the best personal loan. Or, try the internet and use a personal loan calculator to find the total cost of different loans.
You may start by simply looking up loans provider in NZ to get an idea of the available options. For instance, Nectar is one of the top-rated personal loan providers in New Zealand that you may consider. It further offers different types of personal loans at reasonable terms.
2. Consider the purpose of the loan
The next step is to consider the purpose of the loan. Whether you’re consolidating debt, making home improvements, or paying for a wedding, choosing a loan that suits your needs is important.
For example, if you’re consolidating debt, you might consider a personal loan with a lower interest rate.
On the other hand, if you’re paying for a one-time expense, like a home renovation, you might want to consider a personal loan with a fixed interest rate.
Also, make sure you can afford the monthly repayments before you apply for a loan.
3. Determine how much you can afford to borrow
Once you’ve considered the purpose of the loan, it’s time to determine how much you can afford to borrow. This will help you narrow down your options and find a loan that’s right for you.
Remember that the interest rate is not the only factor to consider when comparing loans. You should also consider the fees, repayment terms, and early repayment penalties.
Moreover, it’s important to remember that you’ll have to repay the loan, plus interest and fees, even if you lose your job or fall ill.
4. Compare different lenders
When comparing lenders, make sure you consider the interest rate, fees, repayment terms, and early repayment penalties.
It’s necessary to compare different lenders because each has different terms and conditions. And the reason is that some lenders are more flexible than others.
For instance, some lenders may allow you to repay early without penalties. Others may charge a fee for early repayments. Therefore, it’s important to compare different lenders before you apply for a loan.
5. Check your credit score
According to Experian, the average credit score in New Zealand is 687. The more you know about your credit score, the better your chances of getting approved for a loan.
If you’re unsure what your credit score is, check it for free on Credit Karma. A good credit score is important because it will help you get approved for a loan with favorable terms.
Moreover, it will also help you get approved for a loan with a lower interest rate. On the other hand, if you have a bad credit score, you may still be able to get approved for a loan, but the terms will probably be less favorable.
You can get a free copy of your credit report from any of the major credit bureaus in New Zealand.
Summary
The entire process of taking out a personal loan can be summarized in below mentioned simple steps.
First, you need to decide why you’re taking out the loan. Second, you need to research the different types of loans available. Third, you need to calculate how much you can afford to borrow. Fourth, you need to read the loan agreement before signing it. Fifth, you need to compare different lenders.
Sixth, you need to check your credit score. And seventh, you need to consider a secured loan. By following these steps, you’re more likely to find the best loan for your needs. And you’ll be less likely to experience problems with your loan.
