A Complete Guide to Bad Credit Loans

Have you been dealing with a bad credit rating? Then it would help if you looked into personal loans in New Zealand. Following there is a complete guide that can help you make the right decision about obtaining a bad credit loan.

What are Bad Credit loans?

People with low credit scores can take out bad credit loans if they cannot qualify for a traditional loan from a bank. Generally, a bad credit score is between 300-and 579, which means you have high amounts of debt or have missed or delayed payments.

Despite this, if you have a bad credit history, you may still be able to get a bad credit loan. Many finance companies will not offer you a bad credit loan; however, many credit unions or online lenders will. 

Additionally, these loans start at a minimum of $1000 and can go up to $10,000. If you feel that you will be unable to repay a large loan within the loan term, it is best to avoid taking such a large loan. Taking a loan is meant to help you reach your financial objectives, not undermine them.

There are two types of bad credit loans: secured and unsecured loans. A secured personal loan requires collateral, whereas an unsecured loan does not need collateral to ensure it. You can choose between these two individual loan options according to your financial needs.

You can use this loan to renovate your home, consolidate your debt, or pay for medical expenses. Before applying for a bad credit loan in New Zealand, make sure you compare the rates offered by different lenders so that if you make a decision, you get a loan that gives you the best interest rate.

Interest Rates

  The interest rates on bad credit loans are typically high, ranging from 10% to 30%, with an annual percentage rate typically starting at $8.95 and going up to more than $29.95 in New Zealand. Under the Credit Contracts and Consumer Finance Act 2003 (CCCFA), interest rates are capped in New Zealand, and a lender cannot charge more than 100% interest.

How to Apply For Bad Credit Loans?

If you are applying for a bad credit loan online, a pre-qualification is always helpful. Using a site’s loan calculator, you can estimate your chances of approval. Borrowers who meet the criteria of the responsible lending code may get loans approved quickly.

In addition to applying with brick-and-mortar lenders, you can also apply with NZ online lenders. These lenders generally offer more flexible repayment terms and lower interest rates.

When you have compared rates from different lenders and decided on a credible one, fill out the loan application form. This process usually takes about an hour. After that, the finance company will ask for documentation and run a credit check to see if you have a bad credit history.

In addition to checking borrowers’ credit histories, lenders will check the borrowers’ financial situation and whether they can repay according to the payment schedule. The loan contract of a suitable lender will not have hidden fees, and the credit fees will only be listed there.

If your loan application is approved, you can expect the loan amount to be deposited into your bank account within 24 hours.

How Does Bad Credit Loan work if I’m unemployed?

Consumer Finance Act regulates the entire lending process, which the government controls. Bad credit loans are also subject to certain limitations under this act. A bad credit loan cannot be approved if the person is younger than 18, unemployed for over three months, earning less than $400 after-tax, bankrupt, or in a no-asset program.

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