What You Need to Know about Short Term Loans
For people who need a bit of cash quickly, short-term loans are a good option. While this type of lending is controversial due to its risks, some still find it attractive.
It is important to understand the drawbacks of borrowing from a lender that only allows you to repay the loan within 6 weeks if you need cash quickly. You may be better off with other options financially.
Before making a decision, consider all your options. Here are some reasons why short-term loans can be problematic, and what to consider instead.
What are short term loans?
A short term loan is a type of unsecured loan or personal loan. “Short term loans” refer to loans taken out for a short period of time. Usually, it’s for a small amount (less than $1000).
Borrowers are expected to repay these loans within a few weeks, or when their next paycheck arrives. Using a short-term loan, you can pay for items you need today or pay cash up front for larger purchases.
In addition to car repairs and overdue bills, short-term loans can also be used for living expenses, emergencies, and special treats.
If you pay back the loan within a few weeks, the interest is manageable. Short-term loans can quickly cause problems for you financially because you pay more interest the longer you take to repay them.
Short term loans should be avoided if money is already tight
There is a good chance that you are already struggling financially if you are looking for a short-term loan. Ultimately, if you do not pay off a short-term loan in a timely manner, your financial situation can get much worse.
The interest rate increases significantly after the initial loan term, which is usually just a few weeks. The high debt servicing costs make you even more indebted after that, resulting in a debt cycle where you cannot pay your bills.
Many people who take out short-term loans find themselves in this situation. Before you take this route, contact Loan Direct. We help all sorts of borrowers and can find solutions for most.
We will provide you with options based on your financial situation as soon as we have assessed it. You may opt to consolidate your existing loans into a one that’s more affordable, while borrowing extra cash.
Advice that's right for you
It’s important to trust your finance company when you take out a loan. Loans should be taken out only when they are in your best interest, not the lender’s.
Is it possible to tell if they are acting in your best interests? Yes! Consider one that belongs to the Financial Services Federation (FSF).
Loan Direct, through our parent company Loansmart, demonstrates its commitment to responsible lending practices by being a member of the Association.
According to the FSF Code of Conduct, we must always act in the best interests of our clients.
Interest rates: What you need to know
Interest rates are one of the reasons why short-term loans can be problematic for borrowers. Lenders charge interest to borrowers for borrowing money from them. Fees are calculated as a percentage of your loan amount.
For someone with a good credit history, an interest rate of 12.95 per cent might be typical. The interest you would pay on a $500 loan would be just under $65 over a year.
Short term loans typically have interest rates over 50%. These loans are considered high-cost loans. The interest on short-term loans is typically calculated per day since they are intended for very short loan periods.
A daily rate of 0.25% to 0.80% might seem like a small amount, but when it comes to repaying a loan over time, the amount adds up quickly.
The interest on a $500 loan over a four-week term, for example, would be almost $20. Paying it back over 12 months would cost you about $250 in interest and penalties.
Short term loans with a minimum loan term of six months are available from Loan Direct. This is because we want to ensure that our customers can repay their loans comfortably.
Paying off your loan over a longer period of time makes your repayments more affordable. This means you can improve your credit rating by making payments on time, and if you have a good credit rating, you should be able to get a better interest rate.
Our short term loans come with a customised repayment schedule and rates depending on your situation.
New rules targeting predatory lending
Previously, the lending market in New Zealand was populated with many short term lenders. New laws targeting these lenders were introduced in 2021, which resulted in many of them leaving the market.
With the new regulations, loans can only be charged a total of 100% in interest and fees, and compounding interest on high-cost loans is prohibited. We support this initiative as responsible lenders that protect people in financial hardship.
It is true that some lenders, including high-cost lenders, have a profit-driven motive.
By arranging smarter loans, Loan Direct helps clients through difficult times.
There is a need for emergency loans
In spite of Loan Direct’s belief that short-term loans should be the very last resort, emergency loans are available to those who need money immediately. Sometimes, you need cash very quickly for an emergency.
If you find yourself in that situation, we are here to provide caring financial assistance. At Loan Direct, we make it so easy! We provide fast loans direct to you, often paid the same day or the next*
Simply complete our quick 3-minute online application form, and we’ll be in touch for more information. Then, we’ll put your loan application in front of 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.
Short-term loans: are they right for you?
There are also several other borrowing options available at Loan Direct that may be more suitable for your needs. Our debt consolidation loans are a popular option with people looking to reduce their monthly repayments. We also offer larger loans for amounts up to $150,000.
With a secured loan, you can borrow larger amounts. Our process is very straightforward: after submitting the online application form, a member of our credit team will get in touch with you to go over the options with you.
Understanding our clients allows us to provide them with the most appropriate borrowing solutions.
You can get a free Loan Assessment and see how much money you could save by restructuring your loans to lower your interest rate or extend your repayment period.
Applying for a short-term loan
With our easy online application process, you can apply for a short-term loan now.
- Rates range from 9.95 per cent to 35.50 per cent
- Loans are available both secured and unsecured
- In most cases, we can get a decision on your loan within one day
- The funds for your loan are released on the same day that it is approved*
- If you wish, you may make additional payments
- Flexible lending criteria
- *Subject to responsible lending checks and lending criteria.
Loan repayment calculator
Use our free personal loan calculator to see what your weekly payments could be!
Your monthly income and existing levels of debt will determine what you could borrow.
We will offer you a rate based on your financial situation. It is possible that you will pay more or less than the estimate provided here.
The benefits of choosing Loan Direct
Loan Direct is the right choice when you need a quick loan. No matter how much cash you need, our team is here to help.
Even if you have bad credit, our team can find smart solutions to your financial difficulties with our bad credit loans. A minimum term of six months is required for all our loans, which begin at $2,000.
The majority of our lending is unsecured, but sometimes we need to use a car or another asset as security. Contact us today for a free loan assessment.
We can examine your financial situation and discuss some options with you free of charge.
Knowing where you stand can help you make an informed decision.
Loan Direct loans let you do more
In just three minutes, you can apply for a loan anywhere in New Zealand with Loan Direct.
You can submit an online application at any time from any device. Applying online doesn’t even require you to provide your bank account details. We can easily access that information through a secure link. You will receive your money the same day your application has been approved*.
As long as you have a regular income and can afford your repayments, we should be able to offer you a solution. Upon receiving your application, a dedicated Loan Direct lending consultant will contact you.
The repayment options we offer are flexible. Depending on when you get paid, you can make weekly, fortnightly, or monthly payments.
Short-Term Loans FAQ
In New Zealand, lenders must verify your ability to repay money before lending it to you. In order to determine whether or not you are capable of paying off your debt, lenders will run a credit check.
It isn’t impossible to get a loan with bad credit, and you can improve your credit score if you are diligent about making payments on your loan.
You don’t have to hide your credit score with Loan Direct. Our fast, fair, affordable loans have helped thousands of borrowers regardless of their credit history.
With Loan Direct, people with poor credit histories can get bad credit and second chance loans.
Before lending you money, lenders need to do some checks, so there are no “1-hour loans” or “instant loans.” Through Loan Direct, it is possible to get a same-day loan.
With Loan Direct, you won’t have to wait. After you complete our 3-minute application, we will contact you to discuss your application. Once you’ve chosen the best deal, we’ll transfer the money to your account.
If the contract is completed online and any additional steps are taken before the end of the day, cash can be paid the same day. Depending on your bank, it may arrive the same day or the next morning.
Find out more about Loan Direct’s emergency loans.
A responsible loan broker ensures you can afford a loan before arranging it.
The most important thing to us is that people achieve financial success and freedom and that their credit ratings are not damaged by defaulting on their loans.
Since we are proud members of the Financial Services Federation, we will always look out for your best interests when arranging loans for you.
New Zealand consumer credit laws require lenders to conduct affordability checks before granting loans. Bank statements from the last three months are required when you apply for a loan through Loan Direct.
Based on your income and expenses, we determine whether you can repay the loan. Find out how Loan Direct works.
