Who will lend to me with bad credit in NZ?
More kinds of lender than you might expect will look at a bad credit application, but each has its own rules and none can promise an answer in advance. This page sorts the types so you know where to look, what each one costs, and who to be careful with.
If you have been turned down once, it is easy to decide that nobody will lend to you. But lenders are not one big group with one rulebook. A bank, a finance company, a car yard and a community lender look at you in different ways, and a no from one says little about the rest.
Here is the lay of the land, without naming anyone as a safe bet. We cannot say which lender will say yes to you, because that depends on your file, your income and the car.
The main types of lender, side by side
| Type | What it tends to look at | Worth knowing |
|---|---|---|
| Banks | Clean-ish file, steady employment, a deposit helps | Often the cheapest when they say yes, and the strictest on recent defaults |
| Finance companies | Income, affordability, age of problems | Many do a wider range of files, and rates are usually higher than a bank’s |
| Car dealers | Whatever their finance partners accept | Dealers arrange finance through other lenders, so ask who the lender is and read the contract |
| Brokers | Match your situation to lenders they work with | A broker does not lend, and may be paid by the lender, so ask how |
| Community lenders | Need, ability to repay, sometimes income limits | Can be no-interest, with strict eligibility and a cap on the amount |
| Family or friends | Trust | Cheapest in dollars, risky for relationships unless it is written down |
Banks
Banks tend to be conservative. If your file is clean apart from one old, paid default, they may still be worth a try. If it has recent or several defaults, an insolvency or a judgment, many will decline. If your own bank has watched your account for years and you have a steady wage, it knows more about you than a credit report does, so ask there first.
Finance companies and specialist lenders
These are companies that lend for cars, often to people banks have turned away. They usually charge more, because they take on more risk. What they look for varies a lot:
- how old the problems on your file are
- whether you have steady income now
- how big the loan is compared with the value of the car
- how much deposit you have
Some will look at files with defaults or a past insolvency, and some will not. A broker can help sort that out, because it knows which lenders suit which situations. You can also read our page on bad credit car loan interest rates to understand what drives the price.
Dealers and car yards
Many car yards offer finance, and some advertise to people with bad credit. In most cases the dealer is arranging a loan with a separate finance company. So the questions to ask are: who is the lender, what is the interest rate, what are the fees, and what is the total I will repay? The contract should show all of it. Consumer Protection says you should get a disclosure statement and a written contract, check that the cash price matches, and look out for “free” extras that are paid for through the loan. If you want more on this, see our page on bad credit car yards.
Rent to own is a different product, and the real cost over time can be much higher than a normal loan. We cover it in rent to own cars.
Community lenders
Good Shepherd’s Good Loans are not-for-profit, no-interest and fee-free loans for essentials, including buying or repairing a car up to $7,000, for people who meet the criteria. There are income limits, and some situations are listed as not eligible, such as when Work and Income can help with the purchase, for single Jobseeker Support recipients and when your only income is self-employment. These rules can change, so check goodshepherd.org.nz or call 0800 466 370. We are not saying you will qualify, only that the option exists, and if you do qualify it will almost certainly be cheaper than any commercial loan.
Family, friends and guarantors
Borrowing from family can be the cheapest route, but treat it like a loan, not a favour: write down the amount, the weekly payment and what happens if you miss one. A guarantor is different. They are not lending you money. They are agreeing to be responsible if you cannot pay. Consumer Protection suggests avoiding loans that need a guarantor where you can, because the guarantor can be pursued for the debt.
A worked example, for illustration only
Here is why a deposit, or a cheaper car, can change the picture whoever you borrow from. The rate is invented, and fees are extra.
| Illustrative loan | Rate | Term | About per week | Total repaid |
|---|---|---|---|---|
| $10,000 (no deposit) | 18% a year | 4 years | $68 | about $14,100 |
| $8,000 ($2,000 deposit) | 18% a year | 4 years | $54 | about $11,280 |
The deposit cuts about $14 a week and about $2,800 in total, and it may also help a lender feel more comfortable. If you cannot raise a deposit, see no deposit car finance with bad credit.
How to check any lender
- Search the Financial Service Providers Register for the lender, under consumer credit contracts. The Financial Markets Authority also says the lender should be licensed. If it is not registered, it cannot legally give credit.
- Ask who the lender is, not just the dealer or the broker.
- Ask for the total cost, including the rate, all fees and the total you will repay.
- Check it has a complaints procedure. Every lender must have one, and a financial dispute resolution scheme is behind it.
- Read before you sign. You can cancel a credit contract within five working days of the disclosure, but it is far better to decide first. If in doubt, Consumer Protection says to leave the car at the lot and get independent advice.
Warning signs
- Any promise of approval before someone has looked at your situation.
- A request for an up-front fee to “process” or “release” a loan.
- Refusal to tell you the interest rate or total cost.
- Pressure to sign today.
- A rate of 50% a year or more. That is a high-cost loan, and lenders cannot ask you to repay more than twice what you borrowed. Weigh those carefully.
- Add-ons you did not ask for.
Before you apply anywhere
Get your own credit reports first. Mistakes happen, and you want to know what any lender will see. Our guide to checking your credit score for free shows how. Then write down your weekly budget. If you want a second opinion, MoneyTalks is a free helpline on 0800 345 123.
What happens when you use our check
We are a referral service, not a lender or a dealer. When you are ready, answer four quick questions at our check. It takes about a minute and is not a credit application. A broker partner can then call you to talk through options, and lenders make their own decisions. You see the rate, fees and repayments before you sign, and you pay us nothing. See how we are paid.
Sources
Common questions
Some banks may, but many are strict about defaults and recent missed payments. Each decides for itself, and it is hard to predict from the outside. A bank is often the cheapest option when it says yes, so it can be worth asking early, but nobody can promise the answer.
It can be, as long as the company is registered and licensed and you read the contract. Check the lender is on the Financial Service Providers Register, ask for the total cost, and take your time. If it is not registered, it cannot legally give credit.
Then say no. A loan that takes most of what you have left each week leads to more missed payments. Look at a cheaper car, a deposit, a no-interest loan from a community lender, or waiting a few months, and talk to a free financial mentor on 0800 345 123.
Some lenders ask for one, but it puts the guarantor at risk, because they become responsible for the loan if you cannot pay. Consumer Protection suggests considering avoiding loans that require a guarantor.
Looking at your own report does not. A hard check by a lender after you apply is recorded as an enquiry, which stays on your file for up to four years at Equifax, and several close together can look like risk. Check your reports first, then apply sparingly.