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A personal loan is a monetary loan you can get from a credit provider such as a bank, credit union or online lender – usually for a specific life purpose like renovating your home, paying for a holiday or consolidating several smaller loans. Lenders approve personal loans by evaluating your creditworthiness.

When you enter into a contract for a personal loan, you typically receive money in a lump sum and agree to repay the lender back the money in regular instalments over a specific length of time.

You also pay interest on the amount you borrow, and in some cases, fees and other charges. These interest rates, fees and charges can vary from lender to lender, loan to loan and borrower to borrower.

How do personal loans work?

If you’re considering a personal loan, you should become familiar with some of the details, including how much you can borrow, how to apply and how much they cost. Here are some of the main concepts to remember:

• The amount you can borrow. Personal loan amounts can be very small or very large. We’ve seen lenders offer loans as little as $500 and as large as $70,000.
• The application and approval process. You can apply for some personal loans online in a matter of minutes and be approved (or denied) just as quickly. With others, you may have to visit a branch and it may take days for the approval process to complete.
• The cost. On top of requiring you to repay the loan amount, lenders make their money by charging you in a number of ways. These may include interest on the loan, as well as fees like an establishment fee, monthly fees, late payment fees and early discharge fees. Your specific combination of charges will be described in your contract.
• The loan term. This is how long you’ll be paying off the loan. We’ve seen loan terms as short as 3 months or as long as 7 years.
• The amount of repayments and when they are due. Your loan amount, interest rate and loan term will be set in advance, so it’s easy for the bank to calculate exactly what your regular payments will be and when they are due.

Types of personal loans

Here are the main types of personal loans you may encounter:

• Unsecured personal loans. Your standard personal loan you can use toward various life projects like a holiday, home renovation or medical bill.
• Car loans and other secured loans. A personal loan where you offer up an asset as collateral in case you can’t make your payments. This collateral is officially known as the security. Take for example a car loan, where the purchased car serves as security that the bank can repossess if you can’t make your payments
• Debt consolidation loan. A special type of personal loan you would use to pay off several smaller loans.
• Line of credit. A personal loan where a specific amount is available for you to borrow, but you don’t have to borrow it all. You only pay interest on the amount borrowed.
• Quick cash loan. A personal loan that doesn’t have a strict acceptance criteria so that people with lower credit scores can get the loans they need. These often come with higher interest rates and fees.

How much do personal loans cost?

The cost of personal loans will differ from person to person and loan to loan. A large part of this comes down to your creditworthiness. For example, someone with a higher credit score and a more positive borrowing history will often pay less for the same loan than someone with lower marks.

Here are some factors that will determine how much you’ll pay:

• Interest rate. This the percentage your debt will increase every year. Most personal loans will charge an interest rate. The Australian Securities & Investments Commission has capped interest rates at 48% but we’ve seen rates as low as 5.75%.
• Fees. Many loans will also charge fees on top of the interest, such as a one-off establishment fee to set up the loan or even monthly fees. Some very small loans might do away with an interest rate altogether in favour of one set loan fee.
• Comparison rate. This is simply a loan’s interest rate when fees are factored into it. Since not all loans charge the same fees, this comparison rate makes it easy for you to compare the loan cost of several loans side-by-side.
• Length of loan. Since your interest rate adds to your balance each year, the longer you have your loan, the more you’ll end up paying in the long run (all else being equal).
• Amount borrowed. Generally speaking, the more you borrow, the more you’ll end up paying for the loan.

How do you apply for a personal loan?

1. Decide how much you want to borrow. Work out how much money you need for your holiday, home renovations, debt consolidation or whatever personal project you need the funds for.
2. Work out how much you can afford for payments. Use a loan calculator to work out how long you’ll need to pay back the loan, based on how much you can afford to pay back per month.
3. Compare personal loan options. Identify a few lenders with loans that meet your criteria from the first two steps.
4. Gather your paperwork. Gather together any paperwork the lender asks for. This may include ID, bank statements and proof of address.
5. Apply. You can apply for most personal loans conveniently online.

Does applying for a personal loan affect your credit score?

When you apply for any loan, your credit score can dip slightly. However, with New Zealand’s Comprehensive Credit Reporting system, regular on-time payments can help your score go right back up.

Some lenders will advertise something along the lines of “free rate quote that won’t affect your credit score.” This means they will quote you a rate based off of basic info like your income and the amount you want to borrow – without doing a credit check.

But this is not the same as applying for the loan. If you want to apply for the loan based on the rate quoted to you, you will usually have to go through a credit check and your score may dip as a result.

Who should get a personal loan?

You should only get a personal loan if you have a specific purpose in mind for the money: to help pay for a special project, purchase or life event, or to help out in a time of emergency.

Taking out a lump sum without any real purpose for it could lead you to squander it and end up with a large debt with not much to show for it. For regular ongoing purchases you plan to pay off regularly, you could consider a credit card instead.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual or business. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

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If you’ve ever wondered what your credit report looks like, wonder no more. This guide will give you insight into your credit report, including what information it contains, how to read it, and why it’s so important.

There are three main credit reporting bureaus in Australia, and you can access their version of your report in a number of ways, including in a written/physical format or through an online dashboard.

Each variation may differ slightly in the way it’s presented, but the bulk of the information will be the similar. For this guide, we’ll be using the convenient (and free!) Credit Simple online credit report dashboard to explain what your credit report contains.

Credit Simple gets its data from the credit reporting bureau illion.

Your credit score

When you first login to Credit Simple, you will see your credit score. This is a reflection of your credit-worthiness boiled down from a heap of lending data into a simple number.

Your credit score and score trend

illion scores range from 0 – 1,000 and the higher the score, the more creditworthy you’re determined to be.

Here’s how the scores break down:

• Score of 0. This is the lowest score you can get and means you’re the riskiest kind of borrower. People with a score of zero either don’t have a credit history at all or have experienced a very negative credit event like bankruptcy.
• 1-499. You have a below-average score and are considered very risky to lend to.
• 500-699. You have an average score and with a few small changes to your borrowing behaviour, you could easily improve your score.
• 700-799. You have a good score and lenders are likely to give you favourable treatment. However, you may want to limit the number of applications you make, as this is what is likely keeping you from having an excellent score.
• 800-1000. You have an excellent credit rating and are considered the least risky to lend to. This puts you in a great negotiating position with lenders.

Your credit history

Your credit score isn’t a magic number that is pulled out of thin air. It is the result of a calculation that incorporates heaps of data around your borrowing habits. The data that your credit score pulls from is called your credit history.

Credit Simple also provides your credit history, broken down into the following categories:

• Personal information. Your name, date of birth, address and previous address.
• Accounts. The accounts you have open including mortgages, credit cards, utility accounts and even equipment hire. It also includes details like the amount you owe and a complete breakdown of your payment history.
• Enquiries. The times you’ve authorised a lender or a utility to do a hard enquiry into your credit history (a hard enquiry is an official inquiry related to an application for a loan). Looking at your own credit history (soft enquiry) won’t decrease your score, but too many hard enquiries can lead to a small deduction.
• Authorised agent enquiries. The times you’ve allowed an authorised agent, such as a mortgage broker or a car dealer, to do a credit enquiry on your behalf.
• Defaults. Any payments that are at least 60 days overdue (or were at least 60 days overdue at the time of payment).
• Serious credit infringements. Situations where a lender believes you fraudulently tried to obtain credit or tried to fraudulently avoid your credit obligations.
• Judgements and Summons. Publicly available court records pertaining to your debts.
• Personal insolvency. Publicly available data from the Australian Financial Security Authority related to bankruptcy.
• Other public record information. Other publicly available information that may be useful to potential creditors when determining your creditworthiness.
• Company directorships. Publicly available information from the Australian Securities and Investment Commission about any previous or current directorships you’ve held in any company.
• File notes. Notes placed on your credit history (at your request) explaining or disputing the circumstances surrounding information on your report.

Here’s what it looks like in the tool:

The categories of reporting in your credit report.

You can expand each section to see much more detail about each. Here we are looking at payment history of a specific account listed in the accounts section:

A detailed repayment history for an example account

What can you do with this information?

As you can see, a credit report is quite straightforward although it can contain quite a bit of information. The good thing about a tool like Credit Simple is that it allows you to have all of this information at your fingertips and dig through it systematically.

Going through your report with a fine-tooth comb can help you in a number of ways. You can:

• Identify areas where you could improve. If you see that late payments are hurting your score more than you thought they were, it’s likely to propel you to make changes.
• Identify errors in your report. If you see something reported that you dispute, you can bring this up with the lender or the credit bureau. Credit Simple lets you lodge a dispute right through the tool.
• Negotiate better terms. If you see that you have a good score, you can have more confidence in negotiating with your lender for better terms like lower interest rates and reduced fees.

The information in this blog post is general in nature and does not constitute personal financial or professional advice. It is not intended to address the circumstances of any particular individual. We do not guarantee the accuracy and completeness of the information and you should not rely on it. Before making any decisions, it is important for you to consider your personal situation, make independent enquiries and seek appropriate tax, legal and other professional advice.

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I’m not who you think I am.

Sure, you probably don’t think of me at all, which is fine (I won’t judge you for it) but what surprised me is I’m not who I thought I was either.

I got an email from an Aussie guy out of the blue asking me if I was investing in a ceramics factory in Thailand. A curious opening gambit, for sure, but having checked my portfolio and discussed matters with my business manager (Me: “Honey, do we have any investments in ceramics?” Wife: Snort) I replied that no, as far as I could tell I did not and what on earth was he asking for.

It turns out he has lots of money and was approached about an investment in said ceramics factory and as a way of enticing him in further, was provided with three email addresses for people who had already invested. Being a canny fellow, he checked up on each “investor”, of which I apparently was one, and decided to contact us directly rather than through the addresses he was given, all of which turned out to be some Thai equivalent of Hotmail.

After we chatted I realised just how easy it is to pretend to be someone else online.

Identity is very important to a lot of people because we have to be able to prove we are who we say we are for all kinds of reasons. Travel, insurance, finance, health care, driving, registering your dog and even paying taxes – it all relies utterly on us being able to prove we are who we say we are. Yet in this age of social media sharing we forget just how important it is to safeguard this information.

A friend of mine recently discovered someone else had set up a Facebook page in her name and was chatting merrily away with all her university buddies and generally building up quite a history of being her on Facebook (something she herself doesn’t use). Proving that she was the real her was rather time consuming and not a little alarming. Facebook has a process for this sort of thing. They have a process because it happens all the time. Constantly. Right now someone is out there pretending to be someone else and generally speaking I’m going to go out on a limb and say they’re doing it for nefarious reasons.

A lot of people just aren’t bothered by this. I’ve got nothing to hide, they say, and if you search online for images of “new credit card” you’ll find plenty of people who will happily take a selfie with their new card, complete with all the information you need to go shopping on their behalf.

But you need to think about what information you’re putting out there, and what information other people are sharing about you.

There are three pieces of identifying information that we’re regularly asked for that you really want to keep to yourself or at least only use when you’re connecting with something important like the bank or the government or indeed your credit rating. Don’t use them for social media questions and really think twice before you share them in public.

The first is your mother’s maiden name. Don’t use it as a user name or password and don’t use it as a secret question/answer thing for sites with rubbish security. Keep it for Inland Revenue and the like.

Speaking of which, the second thing is your IRD number. This is more prevalent in the US where you’re asked for your “social security number” more for ID purposes but it’s starting to be used here as well. Don’t use this for anything but connecting with IRD.

The last one is the boring one – your date of birth. Everybody wants your DOB so they can send you electronic bouquets of flowers and get everyone excited for you, but again it’s a detail that is best kept to yourself.

If you figure out a person’s date of birth, their mother’s maiden name and where they live you’re on your way to being able to set up new accounts, order credit cards, buy stuff online and all the rest and that’s not an easy rabbit hole to get out of.

Online security doesn’t have to be about not going online. It doesn’t have to be about avoiding social media and not doing any of those quizzes that tell you what kind of dog you’re best suited to. But you do need to consider what information you’re giving out and whether the person or service you’re giving it to really needs to know that about you.

And remember, if you’re ever a victim of identity fraud, you can easily ‘freeze’ (suppress) your credit report. This means the credit reporting agency can’t share your information with anyone, which will prevent someone from taking out credit in your name, as credit providers will usually not grant new credit where they are unable to do a credit check on someone.

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Are you hoping to secure a mortgage on your dream home? A good credit score can save you from the disappointment of rejection.

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Everyone knows someone who has been a victim of fraud. It can be a nightmare when a cybercriminal has dipped into your bank account, stolen your credit card details or taken out credit in your name.

In the short term your credit score is going to take a dip because you can’t simply delete it. Don’t despair, however. You’re not the first person in this situation and it can be ironed out.

There are a number of different types of fraud that befall Kiwis, says Steve Brown, director of bureau engagement at illion (a credit reporting agency). They include:

Identity theft

This is where a fraudster pretends to be you. Sometimes all they need is your name and birth date. The criminal may also get his/her hands on your passport, driver’s licence, credit cards and other documents and uses them to get credit. Even photocopies of these documents can be used to defraud you. The first you might know is that you start receiving credit card or store account bills you know nothing about.

Electronic fraud

All you have to do to tall victim is click on a link in a phishing email, malware or virus via email. It takes just one click to load a key logger on your computer and record your bank account login and password. The malicious email probably looks like it came from your bank, the Inland Revenue Department or other organisation you have an account with. What’s more, once the fraudster has your login credentials for one account there’s a good chance you use the same passwords for others. Beware that Trade Me accounts can be accessed in this way and your feedback reputation ruined.

Credit or debit card fraud

This happens if your credit or debit card is stolen and used. Perhaps you’ve been shoulder surfed at an EFTPOS machine and then your card is pick pocketed a few minutes later. More sophisticated fraudsters sometimes skim your card, create a copy and start spending on it.

Such frauds are the most insidious things that can happen to you around your credit history, says Brown. “Often the people whose identify or ID is stolen are very good credit risks, making them targets for fraudsters.”

It’s not your responsibility to pay this money back. In the meantime, however, you need to take steps to clear your name and sort out the mess. “There is a lot of work to unwind the damage done,” says Brown.

If you don’t act, the black mark on your credit record could stop you borrowing money in the future, buying a home, or even getting a job because employers often credit check potential employees. There have been cases in the past where debt collectors have chased fraud victims.

The good news is that there is a process that you need to follow. The steps to take are:

• Check your credit report. Monitor any changes.
• Report the crime. You need to report the crime to the police.
• Tell your credit providers. Send the police report to your credit providers and ask them to remove the default or footprint on your credit report.
• Prove you were never there. Quite often, says Brown, lenders and credit providers can identify the location of the IP (Internet) address where the fraud was committed. If you can prove you weren’t in Nigeria, the Ukraine or Invercargill at the time it happened, that could help.
• Set up a credit alert. Ask the three credit agencies illion, Centrix, and Experian to put an alert on your credit file to warn other credit providers and stop the fraudsters in their tracks. You can also get your credit file ‘frozen’ – so that your information isn’t released to anyone without your consent. 
• Repeat. When you think the problem is dealt with get a copy of your credit report from each of the three agencies to ensure that none of the fraudulent entries remain. If they do, approach the credit providers again.
• Get help. If you need help consider contacting the local Citizens Advice Bureau, Community Law Centre, the Banking and Insurance Ombudsman, or Financial Services Complaints Limited for advice.
• Have the fraud alert removed. Sadly your credit score is going to be compromised until this is all cleared up. When it is finally ironed out contact the three agencies to remove the fraud alert.

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Aries
That pain in your shoulder? It’s just your body’s way of telling you that carrying your savings around as coins so the CIA can’t hack your bank account details isn’t the best idea you’ve ever had. Instead, the stars suggest you consider a cheque or savings account with a major bank plus a low interest credit card with low or no annual card fees. Lucky number: anything under 10%.

Taurus
Your coffee order says more about you than you realise, Taurus. Long black? You’re a simple soul but your feelings run deep. Flat white with an extra shot? Friends and coworkers think you’re dumb, and they’re right. Decaf skinny latte? You might as well just get an empty takeaway cup and suck on the cardboard all afternoon.

Gemini
Look after the pennies and the pounds will look after themselves – that’s what the stars are telling you this month, Gemini. What does that mean though, exactly? Not much it all, it turns out, as we converted to decimal currency in 1967. Lucky number: 6 shillings and sixpence.

Cancer
Supermarket fuel discount vouchers hold the key to your financial success this month, Cancer. So get out there and shop shop shop! Buy things you don’t even need to push your trolley over the $200 mark (we recommend batteries as both expensive and easy to carry), then weep when you remember your scooter only takes 10 litres of 91 and you’ll only save a dollar.

Leo
2016 was New Zealand’s hottest year on record, Leo, with temperatures reaching levels unseen in our history. What does this mean to you? Crank that air conditioning up, of course! Anything warmer than 20 degrees and you’re really not trying. And if it gets too cold, hey, pop on a coat (polar bear fur is super-snuggly!).

Virgo
Sporting success looms large for you this year. But in what sport, exactly? The stars are less clear on this point, so you might want to consider inventing your own sport, writing the rules and awarding yourself a gold medal or two. Water-Cricket, anyone?

Libra
Pesky stains in your good pants will mar an otherwise spotless month for you, Libra. Don’t rush to clean them, though, as their shape might hold clues to your financial future! A roughly circular stain (the “coin”) means you’ll come into money, probably next Tuesday. A stain in the shape of a rectangle is a reminder your credit card payment was due last week. And if your stain is roughly the shape of Nigeria, you should reply to those emails and give that exiled Prince everything he’s asking for.

Scorpio
Tipping can be perilous, Scorpio, and while once confined mainly to the USA it’s now finding its way into local bars and restaurants. But how much to add to the bill? The answers are in the stars, of course. As a Scorpio, fluctuations in Saturn’s orbit make it clear that the only tips you should ever give are “always brush after meals,” and “salt gets red wine stains out of carpets”.

Sagittarius
Remember that VCR you could never programme, Sagittarius? Well the good news is that this month is the one that finally sees you working it out once and for all. Sure, your friends might mock you for being 30 years late to the party, but will they be watching today’s 6pm news later tonight or even weeks later? No they will not – so who’s laughing now?

Capricorn
“Stop, drop and roll,” the earthquake ads used to say. Or was that the fire ads? Either way, if you happen to be in a hotel and an earthquake strikes, take our handy advice: drink all the wine from the mini bar, break the bottles on the floor, then blame mother nature. You’re welcome! (Caution: this otherwise excellent ruse really won’t work with the $9 Toblerones.)

Aquarius
Diet has always been a worry for you, Aquarius. The good news is that, as far as the stars are concerned, the answers lies in dairy. Specifically, Patel’s Dairy on High Street across from the Liquor Shed. An ascending Jupiter makes it almost certain that their “goods close to expiry” shelf will have enough on it to see you right all month long (especially if you don’t mind eating a lot of gravy powder). Lucky number: your nearest Accident and Emergency clinic.

Pisces
That bright star racing across the sky at sunset that you’ve been pinning your hopes on all Summer? That’s a urine dump from the International Space Station, so you’ll need to find inspiration closer to home, sorry. The spookiest part of all? We wrote this horoscope for you before the Trump stories broke. You know the ones.

The post It’s in the stars: Credit Simple’s financial horoscopes (February) appeared first on Credit Simple NZ.

Aries
New Year, new you, right Aries? Well, sort of. This is New Zealand, so the best thing you could possibly to do support our grass-based economy is to start 2017 with a new ewe. Depending on where you live, Trade Me has them for under $100 and unlike a puppy, when you get bored with it you can just eat it.

Taurus
If 2016 has gotten you down, Taurus, well you’re not alone. Trump! Brexit! Toblerone increasing the size of the gaps between the chocolate and not lowering the price! Luckily, the stars can explain what’s going on here. You know that thing accountants do where if they think a company will make a loss they bring forward the next year’s losses to make next year seem good by comparison? Well that’s basically what the stars did to us in 2016. Happy New Year!

Gemini
Statistics tell us that 25% of all Christmas gifts go straight into the bin. But don’t despair! Simply cross one in four friends and family members off your gift list this year and, voilà, you’ve turned a depressing statistic into a nifty festive season money saver. Your lucky number: the amount of dollars you won’t spend on junk.

Cancer
“Don’t Dream It’s Over,” sang Te Awamutu’s favourite musical son Neil Finn at Crowded Houses 53^rd final-ever concert last year. Catchy tune, or reassurance that the relationship you thought would last forever stands a chance of being rekindled, despite her burning all your clothes and having the tattoo of your name removed from her arm with an orbital sander? Due to a string of cloudy nights at Credit Simple HQ as we go to print, the stars are unclear on this one. Safest to just go for “catchy tune,” we think.

Leo
Is the ukulele the new recorder? Quite possibly. Recent years have seen the atonal squawk of Satan’s Piccolo replaced with the bland strumming of the world’s most inadequate guitar. How does this affect you as Saturn heralds a new solar year, Leo? Not 100% sure on that point, but at least there won’t be recorders.

Virgo
As a parent, Virgo, it’s never too early in the year to start worrying about school lunches. Nutrition is super important for growing minds and bodies, but who really has time for that? Some might call allowing fast food outlets within 100 metres of school gates “irresponsible”. We just say “Wicked wings, fries and a Coke for $5 please”. Lucky BMI: anything south of 30. Better living, everyone!

Libra
Every penny counts for you, Libra, and for many households there’s nothing that sucks up more pennies than replacement ink cartridges for your computer printer. Even worse, most major manufacturers make the black ink from a pigment extracted from baby dolphins! How to avoid this cost to your wallet and the planet? Stand outside airport business lounges with a USB stick and ask well-dressed strangers if they’ll run off some prints for you inside. (Just don’t ask Gary McCormick though.)

Scorpio
Loyalty cards can be confusing, Scorpio, and it can be hard to know which are worth the effort and which just take up valuable space in your wallet or purse. The stars are clear on this point, though. Whenever you’re asked to hand over a card, just grab the first one your fingers touch, then insist to the shop assistant that they have it wrong, not you. Luck number if things turn nasty: 0800 LAWYER.

Sagittarius
Does every rattle of the letterbox flap fill you with dread at the thought it might be the postie delivering your Christmas credit card bill? Dread not! A little ingenuity will make sure you’re never bothered by such summer nastiness. Simply place a powerful garden sprinkler right by your letterbox and hire a student to turn on the tap every time the postie approaches. Problem solved! (Or you could, you know, spend prudently and pay your entire balance off by the due date.)

Capricorn
A rare January supermoon coupled with particularly high tides at Petone Beach this month mean just one thing for you, Capricorn: surprise relationship news! The stars indicate that now is the best time you could possibly take a DNA test to explore your true heritage and connect with relatives you never knew you had. Because God knows, the ones you do know you have are rubbish.

Aquarius
Life is filled with tough choices, Aquarius. And choosing a bed covering in New Zealand’s fickly summer is among them. Duvet? Blanket? Some sort of waffle weave cotton throw? Luckily, the stars portend 20-50% off all Manchester this weekend only at Briscoes, so you can afford to buy all three, and pick up yet another nonstick frypan to go in the cupboard with all the others while you’re there.

Pisces
Pluto once figured greatly in your affairs, Pisces, but since it’s been voted off the planet-island you’re pretty much faced with a monthly roll of the cosmic dice. The good news? You just threw a double six. What does that mean? Either you’re going to live one year beyond the current age for government superannuation then die, or that Satanism could be a lifestyle worth exploring in 2017. Let us know how you get on!

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