How To Compare Personal Loans

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To choose the right personal loan for your unique circumstances, you’ll first want to compare your options. You can start by deciding what you need a loan for, how much you want to borrow, and how comfortably you can repay the loan amount.

How to choose a personal loan

First, you’ll want to decide on the purpose of your loan, as this will guide you when comparing specific loan products. You can start by deciding if you’ll be using the loan for one purchase (e.g. a vehicle) or multiple purposes (e.g. bills, debts, a holiday), and if you plan to offer security (an asset) on the borrowed amount.

The important difference for you, the borrower, is that a loan amount secured by an asset of equal or higher value is low-risk lending. If you default on your loan, the lender can take possession of the asset, and sell it to recoup their losses. 

If the loan is secured by an asset of lower value than the principal amount, the risk is much higher, as even if the lender reclaimed the asset, they would not be able to recoup all of their losses. 

If you can’t (or don’t want to) provide an asset to use as security on your loan, you’ll want to look at comparing unsecured loan options.

If you are self-employed, earn a low income, or are currently receiving the benefit, you can still apply for an unsecured or secured personal loan. These loans may only be available from select lenders and often have lower borrowing limits, higher rates, and require more documentation to approve.

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Personal Loan Fees and charges

Once you’ve decided on the type of loan you’ll need, you’ll want to compare the interest, fees, and repayments of each. 

The three most important things you should consider when comparing personal loans: 

  1. Interest rates
  2. Borrowing amount and term
  3. Fees, charges, and penalties

When comparing interest rate charges, secured loans (lower risk to the lender) will usually have lower fees and lower interest rates, while unsecured loans (higher risk to the lender) will have higher fees and interest rates.

The maximum amount you can borrow will be determined by the type of loan you apply for. Banks often won’t approve an unsecured personal loan for less than $3,000, while some online lenders may offer personal loans with a minimum borrowing amount of $2,000. 

The maximum amount you can borrow with a personal loan is generally $100,000.

Personal loans in New Zealand are usually offered with terms between one and seven years. The length of your loan will directly influence the total amount you pay throughout the term. A longer term will mean you are allocating a greater portion of your initial repayments toward the interest accrued on the loan. 

Loan fees and charges include establishment fees, monthly fees and annual fees. The hidden fees on your loan can make the advertised rate of a loan seem more appealing than it really is. If you plan to repay your loan early, you should also look at any charges for making additional repayments.

Choosing a personal loan without any fees or penalties for early repayments will allow you to repay your loan earlier and save on interest, either by reducing your monthly repayment amount or reducing the repayment term of your loan.

Once you’ve got those basics covered, you can start comparing personal loans from New Zealand lenders and choose the right loan for your situation and needs. 

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