5 tips for picking the perfect lender

15 January 2018

Applying For A Personal Loan? 5 Tips For Choosing The Perfect Lender

Are you one of the countless New Zealanders currently applying for a loan? Chances are you've already considered one of the big banks, and that's hardly a surprise: they remain a go-to option for Kiwis just like you. But did you know they’re not the only option out there? Far from it, in fact! By broadening your horizons you could find a lender that’s a much better match for your financial needs, you just need to know what to look for.

 

Don’t let the choice overwhelm you

For many of you, the big banks are a comfortable finance option, but as we’re discussing today they’re not the only option on the table. You see, the days of the big banks and their monopoly over the marketplace are well and truly over. Nowadays, Kiwis like you have options, all of which are just a click away.

The times when you’d have to drop into your local branch are now a ‘Back in my day’ story you’ll one day tell your grandkids, but to ensure you’re not also handing your grandkids a large chunk of your remaining debts as you do, it pays to consider all your options. The big banks may not be your only choice, but how much do you know about the alternatives? Let’s take a look:

Credit Unions

Unlike most other banks, Credit Unions are 100% locally owned financial institutions that operate as not-for-profit organisations. What does this mean, exactly? It means that they’re not beholden to the influence of foreign shareholders and investors, but rather are free to reinvest their profits in you, freeing them up to offer lower interest rates on their loans.

Peer To Peer Lenders

Peer to peer lenders skip the middleman, and go directly to the source. Typically operated online, these lenders match people looking to invest their money with a borrower - that’s you! - in need of a loan. With fewer overheads and costs involved, peer to peer lenders can often offer lower loan rates than the likes of credit cards.

Loan cash shops

There’s a reason many consider loan and cash shops as a last resort: their interest rates are high, and their small print is often deceptively so. If you have a really bad credit score or are otherwise having a tough time getting approved for a loan from a reputable provider, consider improving your credit score first before you turn to loan sharks or similar lenders: chances are they’ll cost you far more than you expect.

To summarise, there are numerous options out there. Some will inevitably fit you better than others, it all comes down to the specifics of your financial circumstances. Generally speaking, it’s best to avoid loan and cash shops as long as you can, as they tend to prey on those in need of cash. They’re a last resort, so treat them that way.

Peer to peer lenders as well as Credit Unions are both far more reliable options, so long as you take the time to consider their terms, conditions, and other fees and charges just as you would a bank. As they say, the devil is in the detail! Which leads nicely to this next point. When comparing lenders, look out for:

 

Check the loan rates, fees, and charges

It’ll come as no surprise to hear that the lower the interest rate on your loan, the less money you’ll end up paying. That much is easy enough. What can be difficult, however, is comparing all the rates currently on offer.

Thankfully there are ways to make the process easy. A number of New Zealand sites, for example, like Interest.co.nz and Finance.co.nz do the hard work for you, allowing you to search and sort lenders by their interest rates. Simple!

Before you call it a day, dig a little deeper. Slick television promos and Facebook ads can hype up a great rate just as easily as they skip the fine print that outlines additional fees and charges. In this case, there’s no guarantee that the money you save with a low personal lending rate will make up for exorbitant fees.

 

Find a team you know you can trust

They say you shouldn’t judge a book by its cover, and the same goes for your prospective lender! You want more than flashy adverts and a great rate, you want a lender that has your back and will work with you - not against you - when times get tough.

The best place to find this information is via simple word of mouth. Family? Friends? Colleagues? Learn from those who’ve been there before, and pick their brains about who they’ve loaned money from, and what the experience was like.

While you're at it, check forum posts, reviews, as well as comments sections on Facebook and Twitter to see what users are saying. Easier still, let sites like Shopper Approved and Trustpilot do the hard work for you, both of which feature thoughts, reviews, and awards for many of New Zealand’s top financial institutions. If it’s been given the tick of approval here, chances are it’s a strong candidate.

 

Make customer service a priority

In the grand scheme of rates, fees, and charges, customer service may not rate as a concern, but given many loans last upwards of 2, 3, or even 5 years, that’s a whole lot of time to spend dealing with people behind the desk or on the other side of the phone that you really don’t get along with.

Friendly, supportive staff put your needs first, and are the exact kind of people you want to be dealing with on a daily basis. Do they offer email support? Online customer chat? What’s the wait time like when you pick up the phone? It’s these little things that, over time, all add up.

 

Remain inquisitive & ask questions

Are you unsure of what a term or condition means? Still confused as to how much you’ll actually be paying? What about early or extra payments, will those cost you? There’s a time and place for polite nods, but the loan application process isn’t one of them. Your number one concern here needs to be you and your finances, so speak up!

If you find you’re left with lingering questions without an answer, sit down and talk with your lender, and make sure your questions are adequately answered. To make things easier, prepare a list of questions before you sit down. And if you’re not comfortable doing this in person? Send these through in an email and get the answers you need before you can proceed.

 

Loan provider summary

  • Choice is great, but it can also be overwhelming, so take your time to compare all of the options on offer.
  • A low interest rate is a great start, but don't forget to dig into the fine print and uncover any hidden fees or charges.
  • Trust is a big thing when it comes to your finances. If you're feeling uneasy about anything, trust your gut!
  • Customer service may not rate highly on your list, which is why it's important to bump it up a spot or two! You're going to be dealing with this lender for a while, so why not make your life hassle free?
  • When the time comes to sign on the dotted line, you shouldn't be left with any questions other than 'So when do I get the money?'. If you still have lingering questions, voice them sooner rather than later.