How to compare personal loans in NZ

How to compare personal loans

When New Zealanders compare personal loans, the natural instinct is to look at the interest rate and pick the lowest one. The rate matters, but it does not tell the whole story.

Two loans at the same rate can have significantly different total costs depending on fees and term - and two loans with different rates can swap places entirely once the fees are counted.

This guide sets out what to compare, how to compare it fairly, and shows the arithmetic with a worked example.

Why the interest rate alone is not enough

The interest rate tells you how much interest is charged on the outstanding balance each year. What it does not tell you is the total cost of the loan, because it does not include fees.

A lender charging 11.95% p.a. with a $500 establishment fee can cost more than a lender charging 12.95% p.a. with a $200 fee . On an $8,000 loan over three years, the higher-rate offer works out around $200 cheaper once the fees are counted. Run the same comparison on a $20,000 loan over five years and it flips the other way, because there is more time for the rate difference to compound and the fee matters proportionally less.

The loan term matters just as much as the fees. A lower rate stretched over a longer term can still mean paying thousands more in total interest - a cheaper weekly amount is not a cheaper loan. The rate, the fees, and the term all have to be read together, and the only figure that reads them together for you is the total amount repayable.

What to compare

Total amount repayable

This is the single most useful figure: the total you will have paid by the end of the loan - principal, all interest, and all fees combined. Lenders are required to disclose it in the loan disclosure statement under the Credit Contracts and Consumer Finance Act (CCCFA).

Apply the same loan amount and term to each option, then compare the total repayable figures - that is the clearest apples-to-apples comparison available.

Establishment fee

A one-off charge when the loan is set up, typically deducted from the funds at settlement or added to the loan balance.

Common NZ establishment fees range from around $150 to $500 or more depending on the lender and loan type.

Note that a fee added to the balance also accrues interest for the life of the loan - a $500 fee costs more than $500 by the end of a five-year term.

Ongoing fees

Some lenders charge account or administration fees monthly, per repayment, or annually on top of the establishment fee. A small per-payment fee looks trivial but compounds across a five-year weekly schedule - roughly 260 payments. Check whether one applies and include it in any comparison.

Introducer fee

If you arrange a loan through a broker, an introducer fee may apply. This is added to the loan amount at settlement, and disclosed before you sign.

You are paying for their service in placing you with the right lender. That placement is worth more than it sounds. Brokers are experienced finance professionals, many are licensed to provide financial advice.

They know each lender's risk criteria intimately and often use routing technology to match an application to the lenders most likely to approve it on the best available terms. None of that is visible from a rate table: lenders don't publish their credit appetite, and applying to the wrong one costs you an enquiry on your file.

The honest test is the same one this whole guide is built on. The introducer fee is part of the total amount repayable, so include it in the comparison.

Loan term

The term has a significant effect on both the repayment and the total cost. On a $20,000 loan at 12.95% p.a., stretching the term from 36 months to 84 months nearly halves the weekly repayment (from around $157 to around $85) but adds over $6,000 to the total amount repayable. This is an estimates only, not an offer of credit.

The right term balances a repayment you can hold comfortably against the total cost of borrowing, and when comparing lenders, always compare at the same term, or you are measuring the settings rather than the loans.

Early repayment terms

Some lenders may charge a fee for paying the loan off early or making extra payments; others don't. If you expect to get ahead of the schedule (a bonus, a tax refund, selling something) this term can be worth more than a small rate difference. Ask directly or review your loan contract before committing.

Repayment frequency

NZ lenders typically offer weekly, fortnightly, or monthly repayments. More frequent payments chip away at the principal slightly sooner, so the loan can finish fractionally cheaper. The effect is modest, but comparisons should hold frequency constant, and the schedule should match how you're paid.

How to compare fairly

For a reliable comparison:

• Use the same loan amount for each option
• Use the same loan term for each option
• Use the same repayment frequency for each option
• Include all fees - establishment, ongoing, and any other disclosed charges
• Compare the total amount repayable, not just the weekly or monthly repayment figure

If you are unsure what rate to test for each option, the Nomu loan calculator lets you run the same loan across different rate and term combinations and watch the total repayable change.

What comparison websites can and can't tell you

NZ comparison and ratings sites are useful for orientation - which lenders operate here, roughly what rate bands look like, and which loan types exist. What they can't tell you is the number that decides it: your rate.

Almost every NZ lender prices personal loans to the individual applicant within a wide advertised range, so the 'from' rate on a comparison table is the best case for the strongest applicant - not a quote. Two more limits worth knowing: rate tables date quickly, and ranking sites generally can't show the total amount repayable for your amount and term.

The document that does carry your real numbers is the disclosure statement. Under the CCCFA, every lender must provide one before you sign, setting out the interest rate, all fees, the total amount repayable, and the full repayment schedule. Comparing disclosure statements (or formal offers) is comparing loans. Comparing marketing pages is comparing advertising.

Comparing without wrecking your credit file

There is a cost to shopping around the direct way: every full application records a credit enquiry on your file, and several enquiries in a short window can itself read as a risk signal to the next lender who looks.

Applying once through a licensed financial adviser who works across a panel of lenders gets the comparison done differently: one application, assessed against multiple lenders' criteria, with the options presented back on comparable terms. For how this works in practice, see dealer finance vs using a broker.

If you have not seen your credit report and don't know your credit score, you can get your report for free at centrix.co.nz/my-credit-score/