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Man Personal Finance

18 June 2021 | By Lending People

The possibilities of personal loans, even with bad credit.

Bad credit rating? You may still be able to get a personal loan. Find out if you're eligible and use our free personal loan calculator to see what we can offer.

The possibilities of personal loans, even with bad credit.

If your credit score has seen better days, you might be wondering if you’d be approved for a personal loan. The good news is that you can. Many lenders are willing to look beyond a bad credit rating, but there are a few factors it’s worth being aware of before deciding whether to pursue a finance option. Let’s explore what lenders consider before approving a personal loan, so you can see what you need to get across the line.

What exactly is bad credit?

When lenders talk about “bad credit”, they’re referring to a low credit rating. A few different factors influence your score. One of the main ones is being late with your repayments to other financial institutions. A good way to start repairing your credit score is to pay utilities, credit cards and loans on time. A history of prompt repayments goes a very long way.

What do lenders look at when you have bad credit?

The criteria will differ slightly depending on the lender, but there some common factors that most will assess before deciding whether or not to give you a personal loan.

  • The nature of your bad credit: A low credit score can take up to four years to repair. For that reason, lenders won’t usually take your rating at face value; they’ll dig deeper to find out details like:
  • The size of your debt
  • Whether your debt is recent or long-standing
  • Who your lenders are
  • How many repayments you’ve missed
  • Whether you’re on top of your repayments now
  • Clean bank statements: Most finance applications will require you to provide your recent bank statements – usually from the last 90 days. Lenders aren’t checking how much you spend at Friday night drinks or judging how often you order takeaways – they’re looking at your account conduct. That means they’re searching for signs of repeated gambling, payday loans, numerous missed payments and unarranged overdrafts. Having clean bank statements will mean you’re much more likely to get approved for a personal loan.
  • Consistent income: At the end of the day, the thing a lender cares most about is whether you’ll be able to make the repayments. For this reason, stable employment is really important. Whether your work is part-time or full-time matters less; as long as it’s consistent, that means regular income for over three months.
  • Your ability to afford the repayments: As well as reviewing your income, lenders will look at whether you have any major expenditures, such as other loans. If this sounds like you, don’t fret – it’s still possible to get a personal loan if you already have other debt. The main thing lenders are looking at is whether you can afford all of your repayments comfortably.

    Managing multiple loans can be tricky, so some people choose to consolidate their debt to help them stay on top of it and even pay it off faster. If this is something you’re considering, ensure you understand the pros and cons before making any decisions.

    Ultimately, deciding how much you can afford is up to you, so it pays to have a good (critical) look at your current financial situation and consider how likely it is to change in the future.
  • Your entitlement to work in New Zealand: Because lenders need to see a source of income, they’ll look at whether you’re allowed to work in New Zealand. If you’re a citizen, a resident or hold a NZ work visa, you’re eligible to apply for a personal loan. However, if you’re on a work visa, your loan terms will be limited to your visa’s expiry.
  • A history of bankruptcy: Lenders are unlikely to grant personal loans to people who have recently filed for bankruptcy. However, if you’re discharged from bankruptcy, you may still be eligible.

Weighing up your options

When considering whether a personal loan is right for you, it’s important that you understand exactly what you’re getting into. Read the small print! Ensure you’re comfortable with the terms of the loan and the interest you’re going to pay on it – often, you will have to pay a higher interest rate if your credit score is low. Our online loan calculator can help to give you an idea of how long it may take to pay off your debt and the interest you’ll be charged overtime.

If you’re declined for a personal loan due to your credit rating, you may decide it’s better to wait until your credit file is clear. Alternatively, you could consider offering security to the lender in the form of an asset – like your car or your property. In the instance that you’re unable to pay back your personal loan, the lender would then take your asset.

Here at the Lending People, we have advisers that can assist you in making the right decision. We can talk you through the different loan options from secured to unsecured and help you get your credit report back on track. 

If you decide that a finance option is the way to go, you can apply for a personal loan online. Our providers will assess your unique circumstances and try to deliver the fairest rate possible. You’ll have your answer in 60 seconds and a dedicated adviser on hand to assist you if you need it. Easy peasy.

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¹Fees: We do not charge a fee to use our service (commonly referred to as a platform fee, broker fee, or referral fee) if you are an existing customer who has previously entered into a personal loan that we arranged on your behalf; or you do not enter into a personal loan arranged by us. A fee to use our services is applicable in all other cases. See our Terms & Conditions for the applicable fees.

²Annual Interest Rate (AIR): The AIR offered by our Personal Loan providers ranges from 6.95% p.a. to a maximum of 26.95% p.a.

³Annual Percentage Rate (APR): Also known as the 'comparison rate', the APR is calculated by adding together the AIR plus any additional fees that may apply (like establishment fees charged by providers). New Zealand law does not require APR disclosure, but doing so can better highlight borrowing costs. The APR offered by our Personal Loan providers ranges from 7.80% p.a. to a maximum of 27.91% p.a. The APR is accurate only for the representative example given below and may not include all fees like early repayment fees (if any). Different terms, fees or other loan amounts might result in a different APR.

⁴Minimum and Maximum Repayment Terms: Repayment terms offered by our Personal Loan providers range from 12 months to a maximum of 84 months.

Representative Example of the Total Cost of a Loan: If you borrow $20,000 over a repayment term of 36 months at an AIR of 6.95% p.a., your total repayments will be $22,493 (made up of $20,000 principal, interest charges of $2,243, and an establishment fee of $250). This example assumes monthly repayments and does not include premiums for any optional insurances, fees for using our services (if any) or default fees.

⁵Terms and Conditions: Our services are provided in accordance with our Application Terms & Conditions. All approvals are subject to provider credit criteria and responsible lending requirements. The loan amount and interest rate offered will depend on your circumstances, the type of lending required, and the security (if any) provided will reflect the loan amount and interest rate offered by the provider. Provider establishment fees, terms, and conditions apply.