Exposing the Top 12 Personal Loan Myths In New Zealand

A personal loan can be a great tool to help you get to where you want to be more quickly.

But, there are a number of common myths about personal loans that might affect your borrowing decisions.

Here, we’ll go through some of them and separate fact from fiction.

What is a personal loan?

A personal loan is a loan that you take out in your own name to fund a purchase or expense.

Common reasons people take personal loans include debt consolidation, home renovations, travel, to fund a wedding or just to pay for an unexpected expense that wasn’t in the budget.

At better finance™, we can help you find a personal loan that’s appropriate for your circumstances and situation, subject to eligibility criteria.

What are the benefits of taking a personal loan?

Flexibility

A personal loan can be used for a lot of different purposes.  Whatever your needs, it’s likely that there may be a loan that’s a suitable solution to help you achieve them.

Convenience

Applying for a personal loan may be a lot more straightforward than you expect. You can often go through the process quickly and easily online. And when you work with better finance™️, we’re here to help at each step of the process.

Consolidation

If you already have a number of loans or debts that are starting to be hard to keep track of, or you’d just like to cut down the life admin involved, a personal loan can be a way to consolidate these into one loan. This can make the debt easier to manage and can sometimes save you money, too, if consolidating the loans means you can repay them faster or at a lower interest rate.

Debunking common personal loan myths

Myth 1: Personal loans are expensive

Truth: The cost of a personal loan can vary a lot depending on things like how much you’re borrowing, the type of loan, your credit history and your individual circumstances. In some cases, you might be surprised at the interest rates you may be able to access. Here is some more information about the factors that can affect the interest rate you pay.

When you work with better finance™️, interest rates usually range between 9.95 percent and 29.95 percent per annum.

If you want to get a sense of how affordable a loan might be for you, you could try out the better finance™️ personal loan calculator.

Myth 2: Personal loans require collateral

Truth: If you’re taking out an unsecured personal loan, you don’t have to offer anything as collateral.

When a loan is unsecured, it means that the lender hasn’t taken any security for it. That’s different from a secured loan, where a lender might use a vehicle as security, for example, which means they can sell that security vehicle to recover its money if the loan isn’t paid.

At better finance™️ we can help you work through a range of unsecured loan options to find one that works for you.

Myth 3: Only banks offer personal loans

Truth: There are a number of non-bank lenders operating in New Zealand, including those offering personal loans.

Sometimes, non-bank lenders can offer more flexible solutions. We can help you work out whether a non-bank lender is a suitable option for you.

Myth 4: Personal loans have a higher interest rate

Truth: Personal loans can often have rates that are lower than other borrowing options. Credit cards, for example, often have interest rates of about 22 percent. In some cases, personal loan interest rates could be half that.

The interest rates you might be charged for your personal loan will vary according to things like your credit history and how much you’re borrowing.

If you can improve your credit score, this may help. Even things like paying your power bill on time can help lift it.

Myth 5: A low credit score guarantees rejection

Truth: Although you might worry that having a low credit score will reduce your chances, you may find there are still options.

A number of lenders are willing to work with borrowers with lower credit scores. We can help you to determine what might be available if your credit isn’t great.

Myth 6: Applying for a personal loan will hurt your credit score

Truth: At better finance™️, we’re very careful about your credit score when it comes to helping you find finance.

We’ll help you get your application in the best shape possible and use our experience to submit your application to a lender we think is best suited to your needs and circumstances. Being considered and careful with your application means there’s less chance of it being submitted to multiple lenders.

Myth 7: Personal loans are only for emergencies

Truth: A personal loan can be a big help in an emergency, but that’s not the only scenario in which it might make sense to apply for one.

Maybe there’s a family trip coming up that you really don’t want to miss out on, but you’ve not had time to save for it. Or you’re planning a dream wedding and need a loan to secure your dream venue.

As long as your loan purpose fits with your financial goals and overall circumstances, it can be an effective tool for your financial and overall wellbeing.

Myth 8: The personal loan application process is tedious

Truth: Our streamlined application process is conducted online, so you can go through it anywhere, at any time.

We’ll guide you through collecting all the documents required for the application, and decisions are usually made quickly.

You might be surprised at how quickly a loan application can be turned around – some borrowers hear back within a day or two.

Myth 9: You can’t pay off a personal loan early

Truth: Many lenders will allow you to repay your personal loan early, although in some cases there may be fees charged.

Paying back your loan early can mean saving money in interest. It also means you stop making repayments earlier, which may free up that money for other things.

If you’re looking to pay back your loan early, we can help you look at the ways you might choose to do that.

Myth 10: You can’t have multiple personal loans

Truth: As long as you meet the eligibility criteria, it is possible to have multiple loans.

It’s important, though, to make sure that your borrowing is manageable and you’re not taking on more debt than you can afford to service.

In some cases, it may make sense to consolidate your debts into one loan. This can make them easier to manage. If you can pay them off more quickly, or at a lower interest rate, you may also be able to save money.

Myth 11: You can’t get a personal loan without a full-time job

Truth: There are options for people who are self-employed, working part-time or have other sources of income.

It will usually be important to prove that you have consistent income coming in, whatever source it’s coming from, to give lenders peace of mind that you can repay any loan you take out. We can help you with this.

Myth 12: Personal loans have lots of hidden fees and conditions

Truth: Lenders have rules they must comply with, and one is making clear their fees and conditions. When you take out a loan, it’s important to read the fine print associated with it and ask any questions you may have. The better finance™️ process makes this straightforward – we’ll let you know at the outset what fees you can expect to be charged, and we are here to help answer questions you may have.

Conclusion

As with many personal finance topics, there are a lot of myths that circulate about personal loans.

Working out what’s true and what’s not can make all the difference to how you feel about and use a personal loan.

If you’d like to know more about any part of the personal loan process, or you’d like to get an application underway, get in touch with the team at better finance™️. We’re finance experts and here to help.