Taking control / August 2021

Questions to Ask Before Getting a Personal Loan

A person holding up puzzle pieces with the words “personal loan” on them.

Are you interested in getting a personal loan? These types of loans can be a great help when you need cash fast for things like unexpected car troubles, medical costs, or an upcoming trip. However, before going ahead with a personal loan there are some questions you should ask both yourself and the lender to ensure you make the best financial decision.

Keep reading to find out the eight questions you need to ask before taking out a personal loan in New Zealand.

How much should I borrow?

To figure out how much you should borrow, you need to pinpoint exactly why you are getting out a loan in the first place. Let’s say you are taking out a loan to cover the costs of your upcoming wedding. It’s best to figure out how much you need and only request this much money from the lender. For example, you might not be able to afford the wedding venue cost, so you can get a personal loan for this exact sum, but you may be able to pay for the dress out of your pocket to lower your repayments later on.

Getting exact figures rather than guessing how much money you need will stop you from getting into unnecessary debt.

What kind of finance is available?

There are two types of loans available from most lenders, secured and unsecured loans. Secured loans require security such as a car in case you can’t pay back the loan. Unsecured loans do not require any collateral, however they may have higher interest rates due to the increased risk to the lender.

When choosing a personal loan, you need to ask the lender whether an unsecured or secured loan is better for your circumstances. This may depend on the amount you need and if you have suitable assets for security.

What will the interest rate and fee costs be?

Once you decide on the amount you need to borrow, you need to then ask the lender about the interest rate and fees. This will make a big difference to the overall cost of your loan, so you need to make sure you can afford these fees before signing on.

How long do I have to repay the loan?

The length of time you take to repay a loan will affect the size of your repayments, and the amount of interest and fees you pay. If you go for a shorter term, you can pay off your loan faster with larger repayments. If you choose a longer timeframe this will mean more manageable repayment sums but possibly more fees paid in the long run.

Most lenders will have a minimum repayment timeline so make sure to ask about this when making your calculations.

What documents do I need to apply?

A personal loan is a legal contract so you will need some ID and other statements to get your loan approved. At MoneyShop, we require two forms of ID, bank transaction history showing your income and expenses, a current payslip or WINZ breakdown, and proof of your address. Make sure you have these items handy when applying for your loan.

What is my current credit score?

You don’t have to know your credit score before applying for a loan, as the lender will check this on your behalf. However, assessing your credit rating beforehand is not a bad idea, because your credit score can affect your ability to get a loan and the interest rates offered to you.

In New Zealand, you can get a copy of your credit report from a few specific credit reporting companies.

Do I need a co-signer?

A co-signer is someone who signs your loan contract stating that they will cover the costs if you default on your repayments. Most personal loans do not require a co-signer, but it is always worth checking as this could provide some added security for you.

Have I read the terms and conditions?

Checking the terms and conditions is the golden rule of getting a personal loan. You need to be aware of what you are entitled to and what the lender is entitled to do in case anything changes with your loan.

For example, if you pay back your loan early there may be early repayment fees. There could also be costs if you want to adjust your loan repayment timeline after signing the loan contract.

Simple personal loans from MoneyShop

At MoneyShop, we offer cash loans in New Zealand from $200 to $20,000. Our online application process is easy, with money able to be put in your account in as little as two hours. If you would like to ask us any questions about getting a personal loan, feel free to visit your local MoneyShop branch today!

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