This gap in the financial industry has presented an opportunity for new players to come in with friendlier terms and a quicker response rate than traditional financial institutions. These new players are the payday lenders who have created credit avenues that stretch beyond friends and family by offering payday loans typically designed to help you get over mid-month financial crisis and pay when your check comes in at the end of the month.
With different interest rates, packages and financing options available for payday loans in New Zealand, payday lenders are redefining how New Zealanders access financing.
In this article, we take a deep dive into the world of payday loans, detailing the process from application to approval with practical tips to guide you every step of the way.
What is a Payday loan?
A payday loan is a short term loan usually for a small amount with lending capacity commonly starting at $100 and extending to such limits as may be provided by the lender.
Accessing payday loans are often necessitated by emergencies from car repairs to school fees, medical bills and other expenses.
Its name lends to its purpose with a payday loan typically meant to tide you over to your next pay check from which you then pay off the loan.
Payday loans in New Zealand
Payday loans have become increasingly popular in New Zealand over the last couple of years. These flexible loans starting around 1% per day have become a mainstay across economic classes with the allure of quick cash with minimal or no paperwork delivered almost instantly proving too good to resist.
The flexible requirements for entry into the market by payday lenders has led to an influx of new companies looking to get a share of the growing market. The rate at which the payday loan industry is expanding has also drawn the attention of the New Zealand government. It provides an interesting challenge of providing just enough regulation that it functions within the law without stifling its trademark selling points of flexibility and speed.
How does a Payday loan really work?
If you check online for payday loan options in New Zealand, you are guaranteed to find different lenders all offering a variety of deals from payday loans with bad credit, payday loans with guaranteed approval and so much more.
While all the offers might seem confusing, ever payday loan has a simple structure and certain features that stay constant. Two of these key features that determine a good deal are the interest rates offered on the loan and the timeline for flexible repayment.
- Interest- The payday loan industry is built on and runs on interest. Lenders set interest rates at margins that allow them make profit in the course of your repayment.
- Time – When it comes to payday loans, the simple rule is that quicker is always better. Regular repayments on your loan means paying less interest in the long run and keeping costs down. This is because there are penalties attached to late payments. A couple of slip ups here and there could have you grappling with a hefty repayment bill. Most lenders charge up to $40 as a flat fee for late payment or penalty rates from 0.25 to 0.5.
Why are Payday loans so popular?
The associated elements of speed and ease of transaction is why payday loans have shot to the top of the conversation in New Zealand. Also a major factor is the fact that payday lenders are more open to giving loans to people with bad credit, a sentiment that is not easily shared by their colleagues in traditional financial institutions.
With credit history problems so popular and search terms like payday loans for beneficiaries with bad credit nz or payday loans bad credit continuing to pop up, it is easy to understand why the payday loans operators are receiving such a warm welcome.
Payday loans typically take between 60 minutes and one business day with a lower scrutiny in terms of lending criteria. Instead of focusing on the credit history, payday lenders are more concerned with the borrower’s ability to pay. They assess this by focusing on your income flow over the last couple of months ensuring that there is a pattern that indicates stability.
Who regulates the payday loan industry in New Zealand?
The payday loan industry like most emerging industries presents a familiar challenge to the New Zealand government. The speed and flexibility of the services of payday lenders in filling the gap left by traditional financing has meant that regulators sometimes struggle to keep up.
In New Zealand, the primary legislation that is targeted at regulating the lending industry is the Credit Contracts & Consumer Finance Act (CCFA). Enacted in 2005, the Act which is currently under review is poised to promote responsible lending practices, create accountability measures for a more regulated sector.
The body tasked with enforcing this law is the Commerce Commission. The Commission primarily undertakes to investigate lenders for suspected breach of existing regulations. Individual debtors are however not left without a means of redress. They can make complaints under the Independent Resolution Scheme which all lenders by virtue of the Financial Service Providers Act.
New Zealand is constantly looking at ways of reviewing applicable laws towards creating the right balance that allows payday lenders to operate freely while being accountable and protects the right of citizens who use their services.
Who can take a loan?
This is the tagline that has brought payday loans operators so much success. The ability to tailor their services to fit everyone has proved successful. While low income earners are the major target, middle class and high income earners particularly those that depend on salary or intermittent income via self-employment are also big customers.
Payday loans guaranteed approval in nz is usually the first stop at any sign of financial trouble that cannot wait for more traditional financing options.
Why would high income earners need a payday loan?
When it all comes down to it, the most important money conversation relates to financial discipline and decision making. Even high income earners are not immune to making rash investments or splurging on unnecessary items.
When this happens, turning to a payday lender becomes a viable option at least till the next pay check comes in for them to balance it all out.
Where do self-employed people come into the picture?
For the self-employed, it is often hard to earn the trust of traditional financial institutions in the absence of a steady and stable income history.
With banks and other institutions favouring regular income in determining suitability for loans, the self-employed often get the short end of the stick.
Payday lenders have created service offerings that allow for loans to self-employed people once they demonstrate the capacity and means to repay the loan.
What it takes to apply for a payday loan
The application process for a payday loan is very simple with just a few key requirements.
- You must be 18 years and above and fully resident in New Zealand.
- You must be able to establish an after tax income above $ 400
- If you are in permanent employment, you may be required to provide the contact information of your employer
- Have a bank account where they can ascertain your income and effect the transfer of funds
- An active phone number and email address
You are still eligible for a payday loan if you receive benefits but you must show that you meet the minimum income threshold.
The application process in summary seeks to verify the information you have provided, weigh your capacity to repay the loan and get key details to effect the transfer of funds once the lender is satisfied.
The verification process is a very important part of the process with lenders typically providing their passport, bank statements and photographs. The passport provided must clearly show the date issued, passport number and expiry date. This verifies that the applicant is a legal citizen with key information that can be cross checked across multiple systems in the country’s database.
In determining your credit information and your ability to repay the loan, the payday lender will most likely contact your employer. They will be looking to get information about how much you are paid, when you are paid and how frequent the payment is. This information will help them determine an appropriate payment plan that suits your unique needs.
Once a positive assessment is made on the strength of this information, your application is good to go and the funds will be transferred using your provided bank details.
Why is my lender asking for a reason?
Payday lenders often have serious conversations with applicants about their reasons for borrowing before they approve the loan. This step is not intended to be invasive but is more of a means of understanding your present financial circumstances and determining if a payday loan is the right choice.
As a standard practice, payday lenders are very reluctant to give you loans if you intend to use the loan to settle existing debts or pay off utility bills. This is because such a decision will often lead to you struggling to repay the loan while interest continues to mount.
This is why lenders have this conversation to understand your present financial circumstances and determine if you would be able to make payments when they are due.
Before you take that weekend payday loan in nz
The temptation to solve your financial trouble might land you in bigger trouble if you do not take the time to assess the various payday loans online and which one best fits your situation.
A quick checklist would include:
- Checking interest rates of payday loans online
- Calling and speaking with a representative to get more information
- Ensuring that you stay safe by setting a limit of $1000 dollars for loans.
- Choosing a payday loans provider who is at least registered with the Financial Services Complaint division.
What happens when I can’t pay?
When the joy of running a payday loan with no credit checks no paperwork in nz then the hard job of ensuring you meet up with your repayment schedule begins.
If you cannot pay back in time, you must immediately take active steps to handle the situation:
- Contact your payday loan operator immediately
- Explain the difficulty you have with repaying and ask for available options and plans.
- If you absolutely have to, seek a readjustment of your loan which entails a longer repayment plan and more charges.
- If there are extraordinary circumstances surrounding your inability to replay such as termination, injury or illness, then you might be able to access a loan repayment holiday or activate interest caps where certain conditions are met.
- The Financial Ombudsman Service is an avenue to air your complaints although they typically advise that you approach your lender first.
- Whatever happens, don’t attempt to run away or be fraudulent, it won’t end well
Who do I go to for cash then?
The payday loan market is extremely competitive often to your detriment as a borrower with various deals and offers couched to take advantage of you.
However, there are a couple of solid options in moving forward to make your payday loans nz dream a reality.
Smart Cash offers a competitive interest rate of 361.35% and a failed payment fee of $30. Cash Relief has an annual interest rate of 200% and an establishment fee of $86 with default meaning a $10 payment. Advanced Cash offers a steep alternative with a much higher interest rate compared to the two and default fees averaging over $40.
Getting it right
Payday lenders have revolutionized how credit works allowing you a variety of options and packages to pick from. To get the best deal, you have to remember to take your time to assess all the offers to determine the best fit for your financial circumstances whether it’s a loan that accepts benefits or payday loans for bad credit in nz.
The payday loans industry in New Zealand is an exciting opportunity tailor made to your needs, all you have to do is look in the right places.