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Managing debt

Here’s what the new lending rules mean for you

29 November 2021
Reading time: 5 minutes


Posted by Tom Hartmann , 1 Comments

Overall, borrowing is getting safer here in New Zealand. Thanks to recent rule changes, the chance of you getting into crippling debt will be lower.

On the flipside, you’ll need to provide a few more things when you apply for a loan or to increase your credit limit. You may not be able to borrow in the same way you’ve been used to.

Essentially, before they can lend, banks and other lenders are now required by law to assess whether you can afford to top-up your credit or borrow. Applications may take longer, so try not to leave it to the last minute!

What’s changing about getting loans and credit

From 1 December, lenders will have to make extra sure:

To figure out if you can afford a loan or credit, and whether it suits you, lenders will be gathering more information about your circumstances, income and expenses than before. They’ll ask questions and verify the information you provide.

Save time when borrowing with this checklist 

It will help to come prepared with documents that show your: 

You’ll also need to take along:

It will help to know where you’re at with your money

Sorted has got the tools so you can work out your financial situation and make the application process as quick and smooth as possible.

Navigating the new lending landscape

One of the team here at Sorted recently had to redo her home loan application because of the new lending rules. She definitely noticed some differences in the process.

“The income section asks for a few more details,” she said, and there was “a new question where it specifically asks if your income is likely to decrease in the next 12 months.”

She noticed changes in the way expenses were broken down and detailed, such as different types of insurances and rates. And of course, the debt section specifically called out popular Buy Now, Pay Later schemes like Afterpay, Laybuy and Zip.

And in terms of her family’s expenses, the application even asked which ones they’d be unwilling to give up.

These changes are the latest efforts to keep borrowers safe

Over the last 18 months, changes to lending laws have made borrowing fairer, protecting people from excessive interest and fees. 

In 2020, limits were set on how much lenders can charge in interest and fees on payday loans, where the annual interest rate is 50% or even higher. Thanks to these limits: 

Also thanks to these changes, mobile traders also now have to follow the same rules as lenders. 

4 tips to remember when applying to borrow money

Where to get help

Now if you find you are unable to get a loan because of these changes, you will have other options. Here’s where to start exploring these, especially when money gets tight.

 

Comments (1)

Comments

  • Gravatar for

    23 March 22

    I Hate these new laws, use to be a good credit score would get you a credit card, now you need to earn over 200,000 dollars. Where do you think low income people go to to get loans? It's crazy stuff... Just hope NZ doesn't bring in the debit card where people need to photograph their undies to get approved purchases.



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