The New Zealand personal loan market is facing a surge in demand. In August, Centrix reported a 10-month high in personal loan borrowing, with more than $500 million in new loans. This uptick suggests that consumers are turning to personal loans to cover their expenses in the face of high inflation and rising interest rates. Over the past three months, Google searches for personal loans have increased by 22%, further demonstrating the high demand for these loans.
Data from online loans provider Loansmart shows that the average size of personal loans has risen from $6,000 to $14,000. But it’s not all new borrowing, says Managing Director Murray Greig, “Many people are looking at ways to consolidate existing debts to make repayments more affordable. Certainly, it makes sense to look for cheaper alternatives to high-cost loans”. Greig reports that application numbers are strong, but approval rates are lower by about 1.5% than previous months.
Affordability is a factor in lower approval rates, as borrowers don’t necessarily have the discretionary income to take out another loan. This is where debt consolidation can play a part. Saving on existing loan repayments while getting a top-up at the same time from a low-cost lender is a better alternative to taking out another high-cost loan. The difference between a 25% interest rate and a 10% one is huge, and borrowers should shop around to try and get the best rate.
As finances continue to tighten for households, personal loans may provide some immediate relief – but it’s important for borrowers to carefully consider their financial situation before taking on any new debt. Check all your current borrowings and interest rates, and ask for a loan assessment to see if you can save anything. You can also estimate how much you will save by using a debt consolidation calculator. Although actual savings will depend on your financial situation.
