Secured and payday loans, guarantors, and overdrafts. Understand the best credit options for you.

What to check before you apply for a loan

No matter what kind of loan you're thinking of getting, take some time to get prepared before you sign the contract.


Tips and your rights: You'll find helpful information on this page and these links:

Tips for each stage of a loan (English)(external link) — Commerce Commission

Tips for each stage of a loan (Māori)(external link)  — Commerce Commission

Tips for each stage of a loan (Chinese)(external link) — Commerce Commission

Tips for each stage of a loan (Korean)(external link)  — Commerce Commission

Tips for each stage of a loan (Samoan)(external link)  — Commerce Commission

Tips for each stage of a loan (Tongan)(external link)  — Commerce Commission

Worksheets and resources(external link) — MoneyTalks


  • Your total debt: The credit contract should tell you the total amount you will repay, including admin fees, debt collection fees and all interest. The Credit Contract and Consumer Finance Act limits how much lenders can charge in interest and fees on high-cost loans. Lenders cannot ask you to pay back more than twice the amount borrowed. They cannot charge more than 0.8% of the unpaid loan balance in interest and fees per day when averaged across the loan term, and cannot charge compound interest on high-cost loans. Make sure your contract has this information and you're happy with it.
  • Security: Will your home, car or household items be used as security for the loan? If you don’t keep up the repayments, the lender may be allowed to repossess what is listed as security. The lender cannot take certain goods as security, such as beds, cooking equipment, medical equipment.
  • Fees: Read your contract's fees section, for example, establishment (set-up) fees, regular admin fees, late fees. Default fees for missed payments must be $30 or less for high-cost loans. If you’re not using a broker, a broker fee shouldn’t be added to your loan. Check if fees are within legal limits (see Your total debt above). If you are not sure, ask the lender or a free financial mentor.

Find out about:

  • Low-cost loans: If you're on a low income, you may be eligible for a low-cost loan. See the Sorted website for a full list of microfinance lenders.

Microfinance providers(external link) — Sorted

  • Penalties: What happens if you miss a payment? What is the effect on your credit score? Examples of common penalties include default fees, higher interest, and over-limit credit card fees.
  • The lender: Check online reviews. Ask friends and family. Check if the lender is registered. If they aren't, they can't legally give credit.
  • Complaints procedures: Every lender must have one. Ask the lender, check your contract, or search on the Financial Service Providers Register.

Financial Service Providers Register(external link) — Companies Office

Shop around for:

  • The best deal: A lender's standard contract terms and costs of borrowing must be available to the public for each type of loan they offer. Compare lenders to find a good deal — and to help work out your total debt.

Get advice:

  • Don’t be pressured: Take the contract away and get advice on the paperwork before you sign.

Credit contracts: Plain English definitions

Wherever you are in the loan process, talking to a free financial mentor can help you make the right choice, get out of debt, or avoid it altogether.

Contact information(external link)  — MoneyTalks

Personal loan types and lenders​

Secured and unsecured. Car finance. Payday loans. Microfinance. Loans for bad credit. Buy now, pay later. Credit cards. Debt consolidation. Guarantors. When it comes to loans and lenders, there are a lot of options. It's important to be aware of the costs, what happens if you can't pay, and your rights.

For legal advice on your rights with credit and debt after a disaster, visit the Community Law Centre website.

Disaster relief(external link) — Community Law

Lower-cost options

Secured loan

Agreed overdraft

Loans with guarantors

Debt consolidation

Buy now, pay later

Peer-to-peer lending


WINZ loans and grants

Higher-cost options

Unsecured loans

Unauthorised overdraft

Payday lenders/loan shops (cash loans)

Credit cards

Lower-cost loan options

Some loan types and lenders provide options with cheaper interest rates and fees. These are available from different kinds of lenders, such as secured loans from a bank or non-bank lender, or buy now, pay later through a retailer.

With any loan, the best way to keep the cost down is to keep up to date with your repayments and only borrow what you need.

Even low-cost loan options can become high cost if you miss payments and must then pay default interest and fees.

Secured loans

The lender needs an item to secure the debt, such as your home or car. This is to protect the lender in case you fail to pay — they can repossess and sell the item to cover what you owe.

A secured loan could be through your bank or a non-bank lender. Some secured loans also have a guarantor.

Examples of secured loans include:

  • Car finance: You buy a vehicle and pay for it in instalments. It can be repossessed if you don't keep up with repayments.
  • Credit sales (or hire purchase): The item you buy on finance is the security, such as TV or sound system.
  • Personal loans: One or some of your possessions are used as security.
  • Mortgages: Your home secures the loan used to buy it.


Hire purchase and buying on credit

Essential household items can't be used as security if you already own them, for example, beds, washing machines, cooking and medical equipment, passports, identification documents.

Loans with guarantors

The borrower has a guarantor who acts as a back-up if they do not pay back their loan. A guaranteed loan could be through a bank or a non-bank lender. If the borrower stops paying — or breaks any other rules of their credit contract — the lender may have the right to:

  • chase the guarantor for money owed, including fees and interest
  • get the guarantor to put right any other broken rules, such as updating car registration or buying insurance.

Lenders might ask for a guarantor if the borrower has:

  • no credit
  • bad credit.

For more information on your rights as a guarantor and what to do if something goes wrong, see:


Debt consolidation

Combining multiple high-interest loans into one bigger loan with lower interest, but generally paid over a longer term. You might end up paying more overall, but your weekly repayments could be smaller, so you're more likely to be able to keep up with repayments. This saves you money in default fees and extra interest. It also makes it simpler with one repayment instead of several.

Don't assume every debt consolidation option makes financial sense for you. Always check fees and penalties, such as fees for altering or transferring your existing loans.

If you're interested in consolidating your debt and paying it off this way, a free financial mentor can help you. Start by contacting the free helpline MoneyTalks.

Contact information(external link) — MoneyTalks

With lower repayment amounts it might be tempting to take out more debt. Resist temptation. The aim is to pay off your debt by making repayments achievable.

Debt consolidation(external link) — Sorted

Buy now, pay later

You buy an item in-store or online, take it away but pay for it over time. Schemes like After Pay and Part Pay might not feel like loans, but similar penalties apply if you miss payments.

If you make all payments on time, there is no added interest. But if you miss payments, you pay default fees. Some schemes also have admin fees, payment processing fees, and other costs which will make your purchase cost more than if you bought it upfront. Read your contract carefully to see if there are extra fees before you sign.

Buy now, pay later is not covered by the Credit Contracts and Consumer Finance Act. For your rights, see:

Buy now, pay later

Agreed overdrafts

Your bank agrees to extend your main account below $0 to a certain amount, such as a limit of -$1,000. Costs might include admin fees and interest.

Interest rates for arranged overdrafts tend to be lower than a credit card. However, if you spend over your limit, you might be charged penalty fees and higher interest rates. These interest rates can be like credit card interest.

Peer-to-peer lending

A form of crowdfunding where borrowers are matched with investors, usually online.

Borrowers can access loans at cheaper rates than at a bank or finance company. Investors get a higher rate of interest than from bank savings.

Before you use a peer-to-peer service, make sure it's licensed by the Financial Markets Authority. This gives you confidence they have a system for checking borrowers, follow rules on presenting information, and have a process for dealing with complaints.

Peer-to-peer lending(external link)  — Financial Markets Authority

Options for people on lower incomes

These can be a good alternative if you worry you might not be eligible for other lower-cost loans:

Higher-cost loan options

These types of loans tend to have higher interest and fees. Because of this, even if you make repayments on time, the total cost ends up being much more than other kinds of loans. If you miss payments or go into default, additional fees and interest are charged.

With any loan, the best way to keep the cost down is to keep up to date with your repayments and only borrow what you need.

Unsecured loan

The lender doesn't need you to list items as security. If you default on an unsecured loan, the lender cannot take any of your possessions. These kinds of loans tend to have higher interest rates than a secured loan as the lender doesn't have the security items as a back-up.

Unauthorised overdraft

Your bank has not agreed to your balance falling below $0 and charges you extra if you don't have enough in your account to cover all payments. Fees include a standard fee as soon as your account dips below $0, plus extra interest rates the longer your account is in overdraft.

With an agreed overdraft your rights are covered by the Credit Contracts and Consumer Finance Act, but with an unauthorised overdraft they are not. See your rights below in If things go wrong.

Payday loans/lenders

Payday loans, sometimes called cash loans, can be a tempting option when you're under pressure, particularly if you have bad credit and get turned away by other lenders. But the overall cost of borrowing tends to be much higher than other options.

High costs come from:

  • interest rates — high-cost loans have annual interest rates of 50% or more, higher than a credit card or unarranged overdraft.
  • fees, such as establishment and admin fees which can stack up. If you miss a payment, you will likely pay additional default fees.

The Credit Contracts and Consumer Finance Act limits how much lenders can charge on interest and fees for high-cost loans:

  • Lenders cannot ask you to pay back more than twice the amount borrowed.
  • They cannot charge more than 0.8% of the unpaid loan balance in interest and fees per day when averaged across the loan term — and cannot charge compound interest.
  • Default fees for missed payments must be $30 or less.

The high cost of payday loans often means high repayment amounts over a short period of time. This can be difficult if your income is not consistent.

High-cost lenders often only talk about the weekly repayment amount, but it's important to understand the true cost over time.

Work out the overall loan cost with this calculator on the Sorted website:

Debt calculator(external link) — Sorted

Other high-cost lending includes:

Credit cards

If you are struggling to pay, talk to your lender. They might agree to change your payments, or you could apply for hardship.

Payment problems

If things go wrong

If you are having problems with your lender, e.g. unexpected fees, misleading information on interest rates, or think you should not have been given the loan, follow these steps — you might not need to do all three:

  1. Contact the lender: Talk to the lender or broker as soon as possible. Many issues can be solved at this step.
  2. Contact the lender's dispute resolution scheme: If you and the lender can't agree, get independent help to solve problems.
  3. Report the lender to the Commerce Commission: This government agency gathers information to identify lenders who break the rules. It doesn't take on individual cases but acts against lenders who often break the rules.

1. Contact the lender

Before you make contact, read our information on:

  • your rights
  • how to complain.

A free financial mentor can help you contact the lender or talk to the lender for you. Start by contacting the free helpline MoneyTalks.

Contact information(external link) — MoneyTalks

Your rights

Most credit contracts and loans give you rights under the Credit Contracts and Consumer Finance Act (CCCFA).

Lenders must:

  • Follow lender responsibility principles, guided by the Responsible Lending Code.
  • Check the loan is suitable, for example, ask about the purpose of the loan, the amount you need, if you want to be able to pay off lump sums, any extra products you might want, if you are likely to want to top up your loan.
  • Check you can afford it, for example, ask about your day-to-day expenses like travel and food.
  • Help you understand the loan, for example, provide key information in writing like repayment amounts and how interest is calculated.
  • Limit interest and fees for high-cost loans to no more than 100% of the amount borrowed, and no more than 0.8% of the unpaid loan balance in interest and fees per day when averaged across the loan term.
  • Default fees must be $30 or less.
  • Make sure the loan is not oppressive, for example, the lender's behaviour and the loan contract itself cannot be extremely unfair or unreasonable.

Failure to do so can result in a refund of interest and fees and or damages to the borrower.

What you can expect from your lender(external link) — Commerce Commission

You should:

  • Give accurate and complete information: If you lie about your income or costs, then later have problems paying, the lender may not be held responsible if they had no good reason to believe you gave incorrect information.

Credit Contracts and Consumer Finance Act

Loans not covered under the CCCFA:

  • Buy now, pay later plans
  • Unarranged overdrafts

But you do have rights under these laws:

  • Fair Trading Act: Lenders must not mislead you, including in adverts or in contract terms (rules of the document you signed), for example, adverts for 4% interest but charging you 6%.
  • Consumer Guarantees Act: Lenders must not provide sub-standard services, e.g. they need to use a reasonable level of care and skill and complete your work in a timely way.

Fair Trading Act

Consumer Guarantees Act

2. Contact lender's dispute resolution scheme

All banks, lenders and financial advisers must belong to a financial dispute resolution scheme. This independent body can:

  • give you information about how lenders should act
  • share tips on how to complain to your lender
  • look into certain complaints when you and your lender cannot agree on a solution.

It's free for you talk to them and make a complaint. Or a free financial mentor can do this for you. Start by contacting the MoneyTalks helpline.

Free confidential advice(external link) — MoneyTalks

There are four financial dispute resolution schemes. To find out which your lender belongs to, you can either:

  • Ask your lender.
  • Phone any one of the four schemes to find out. For contact details, see:

Financial dispute resolution schemes

You can also check the lender's entry on the Financial Service Providers Register:

Search the register(external link) — Financial Service Providers Register

Possible outcomes

Disputes resolution schemes can only consider complaints up to a certain amount. Check with your lender's scheme to see their limits.

If the scheme investigates your complaint, it might recommend the lender:

  • apologise
  • refund some fees or interest
  • agree a new repayment plan, such as restructuring your loan
  • switch to a more appropriate interest rate.

3. Report your lender

The Commerce Commission enforces certain consumer laws, including the Credit Contracts and Consumer Finance Act. This is designed to make sure businesses lend responsibly, for example, to check loans are affordable and disclose all interest and fees.

Commerce Commission doesn't act on behalf of individuals and can't investigate every complaint. But their investigations do help make sure businesses comply with the law. Your information helps them assess which consumer issues cause greatest harm.

Make a complaint(external link)  — Commerce Commission

Credit Contracts and Consumer Finance Act

More help

Get support at any point from:

  • MoneyTalks: This helpline gives free budgeting advice to individuals, family and whānau. Financial mentors can help you understand your financial situation, organise your debt and plan. They can also put you in touch with a local budgeting service and help with issues you're having with lenders. Phone 0800 345 123, or use live chat, email or text, if you prefer.

Contact information(external link) — MoneyTalks

  • Citizens Advice Bureau (CAB) — a free, independent service, run by volunteers. CAB can advise you on your consumer rights and obligations, in person, by phone, or online.

Citizens Advice Bureau(external link)