For people who need a bit of cash quickly, short term loans are a good option.
Even though this type of lending is controversial due to its risks, it remains an attractive option for some.
It is important to understand the drawbacks of borrowing from a lender that allows you to repay the loan within 6 weeks if you need cash quickly.
Financially, other options are likely to be better for you. Consider all of your options before making a decision. Read on to learn more about short-term loans, why they can be problematic, and what to consider instead.
Short term loans: what are they?
The term short term loan refers to borrowing money for a relatively short period of time. It’s usually for a small amount (less than $1000).
These loans are designed to be repaid within a few weeks, or when the borrower receives their next paycheck.
The interest you pay is manageable if you pay back the loan within a few weeks.
As a result, a short term loan can quickly become a monkey on your back because you pay more interest the longer you take to pay it back.
If money is already tight, avoid short term loans
There is a good chance that you are already struggling financially if you are looking for a short-term loan.
In reality, an unpaid short term loan can cause your financial situation to get much worse if you do not pay it off in a timely manner.
Interest rates increase significantly once you go beyond the initial loan term – usually a few weeks.
After that, you’re trapped in a debt cycle where you can’t pay your bills because of the high debt servicing costs, which makes you even more indebted.
No one wants to be in this situation, but it happens to many people who take out short-term loans.
Get in touch with Auckland Loans before you go down this path. As soon as we assess your financial situation, we can give you options that are in your best interest.
Finding the best advice
It’s important to trust your finance company when you take out a loan.
When taking out a loan, you need to make sure it is in your best interest, not just in the lender’s pocket.
How can you tell if they’re acting in your best interest? You should choose one that is a member of the Financial Services Federation (FSF).
The fact that Loansmart trading as Auckland Loans is a member of the Association demonstrates our commitment to responsible lending practices.
In accordance with the FSF Code of Conduct, we must always act in our clients’ best interests.
What you need to know about interest rates
There is a reason why short-term loans can cause problems for borrowers: interest rates.
In essence, interest is the fee that a lender charges for borrowing money from a borrower. The fee is calculated as a percentage of how much you borrow.
An interest rate of 12.95 percent might be typical for someone with a good credit history.
Over 12 months, you would pay just under $65 in interest on a $500 loan.
An average short term loan has an interest rate of 50% or more. Loans of this type are considered high-cost.
Because short-term loans are intended for very brief loan periods, interest is usually charged per day.
Daily interest rates range from 0.25% to 0.80%, which may not seem like much, but the longer it takes to repay the loan, the more it adds up.
A $500 loan, for example, would cost almost $20 in interest over a four-week term – plus an establishment fee.
Taking 12 months to pay it back would cost you about $250 in interest and penalties the lender would charge you for being late.
As a result, short-term loans have high interest rates. That’s fine if you’re paying back the loan within a few weeks, but if it takes longer, you’ll be slammed with massive costs making it difficult to repay the loan, leaving you in terrible financial straits.
Regulations limiting dodgy lending
In the past, there were many more short-term lenders in the New Zealand market.
Since 2021, new laws have been introduced to target predatory lending practices, so a lot of those lenders have been weeded out.
New rules limit the amount of interest and fees that can be charged on a loan to 100% and prohibit compound interest on high-cost loans.
In our role as responsible lenders, Auckland Loans supports this initiative that protects people in financial distress.
There are some lenders – including high-cost lenders – who are motivated by profits.
With Auckland Loans, we help our clients through difficult times by arranging smarter loans.
Loans for emergencies are needed
Although Auckland Loans believes short-term loans should be the absolute last resort, emergency loans are available for people who need money right away.
There are times when you need cash very quickly for something that comes up. At Auckland Loans, we offer caring financial assistance to those in that situation.
It’s so easy with us! You don’t have to jump through hoops because we do it for you. Complete our 3-minute online application form, and we’ll contact you for more information.
Afterward, we’ll submit your loan application to 11 different lenders so you can choose the best deal. With smart solutions that meet your needs, we work hard to get you a fair deal.
Why choose Auckland Loans
Whenever you need a quick loan, Auckland Loans is the right choice. Our team is here to help you no matter how much cash you need.
We specialise in finding smart solutions for people in tricky financial situations, even if they have bad credit. We offer loans starting at $2,000 over a six-month minimum term.
Generally, our lending is unsecured, but sometimes we need to use a car or other asset for security.
Get in touch with us today and we'll give you a free loan assessment.
Let us take a look at your financial situation and discuss some options with you without any cost or obligation.
You can make an informed decision by knowing where you stand.
Short-Term Loans FAQ's
Can I get a short-term loan with no credit check?
Before lending money to you, lenders in New Zealand must verify your ability to repay it.
As part of this process, lenders will run a credit check because your credit history provides valuable information about your debt management.
Bad credit doesn't mean you can't get a loan, and if you're diligent about making your loan repayments, your credit score can improve.
With Auckland Loans, you don’t have to hide your credit score. Despite their poor credit history, we have helped thousands of borrowers get fast, fair, affordable loans.
Can I get a loan in 1 hour?
A "1-hour loan" or an "instant loan" don't exist, since lenders need to do some checks before lending you money. There is, however, the possibility of getting a same-day loan through Auckland Loans
We don't keep you waiting at Auckland Loans. Upon completing our 3-minute application, we'll contact you to discuss your application before providing you with multiple options.
We'll arrange for the money to be transferred to your account once you've chosen the best deal. Cash can be paid the same day if the online contract and any additional steps are completed before the end of the day. It may arrive the same day or the next morning, depending on your bank.
Learn more about getting a same-day loan with Auckland Loans.
Do you guarantee approval for short-term loans?
We make sure you can afford a loan before we arrange it as a responsible loan broker.
Our goal is to see people achieve financial success and freedom, not default on their loans and damage their credit ratings.
As proud members of the Financial Services Federation, we must put your best interests first when arranging loans.
Can I get a short-term loan with no bank statement?
Before granting loans, lenders are required to conduct affordability checks under New Zealand consumer credit laws. When you apply for a loan through Auckland Loans, we require you to provide your last three months' bank statements.
Using this, we determine whether you can repay the loan based on your income and expenses.
