Which lenders consider benefit income in NZ?
Banks, finance companies, dealer finance, community lenders and high-cost lenders all treat benefit income differently, and no list of names can tell you who will say yes. What you can do is learn the types, check any lender is legitimate, and know the rules that cap what a high-cost lender may charge.
Why there is no honest list of names
Search for lenders that accept beneficiaries and you will find lists. Most are written by lenders or by sites paid when you apply. A name on a list does not tell you whether that lender will approve you, what it will charge you, or whether the policy is still current.
So this page does something else. It describes the kinds of lender, how each tends to treat benefit income, and how to check any lender before you hand over your details. Nobody can promise approval, and we do not name a lender as one that will lend to you.
Fair Finance is a referral service, not a lender. We say more about that at the end.
The main types of lender
Banks
Banks offer car loans and personal loans, usually at lower rates than other lenders. They are also generally the most careful about benefit income, particularly if it is your only income. Long history with a bank, savings and a clean file all help. If a bank says no, that is information about that bank, not about every lender.
Finance companies
Finance companies lend for vehicles and personal needs. Some specialise in applicants with a thinner or damaged file, and some will consider benefit income as part of an affordability assessment. Rates are usually higher than a bank’s, since the lender is taking more risk. Establishment and other fees apply, so look at the total cost of credit, not just the weekly repayment. See total cost of credit.
Dealer finance
Many dealers arrange finance for you, from their own finance arm or a lender they work with. It is convenient, but the dealer may be paid by the lender, and the car price and the loan can be mixed together. Compare the finance with a loan from elsewhere. Our guide to dealer finance, brokers and banks explains the differences.
Community and not-for-profit lenders
These lend for essentials, with a focus on people on low incomes. Good Shepherd NZ’s Good Loans are no interest and fee free, with income and other criteria, and its page says it cannot help people on Single Jobseeker Support or where Work and Income can assist. Ngā Tāngata Microfinance, supported by Kiwibank, offers low-cost loans for people on low incomes. Loan sizes are usually small, so they suit a cheaper car. Always check current criteria.
High-cost and payday lenders
These lend small amounts at very high cost. If you are on a benefit, a high-cost lender may be quick to say yes. That is not always good news. The rules below limit what they can charge, but even capped loans can cost far more than the alternatives. A car is rarely a good reason to use one.
Brokers and referral services
A broker or referral service does not lend. It takes your application and passes it to lenders. That can save you from applying everywhere and collecting hard checks. It also means you should ask who is paid by whom.
How to check any lender in five minutes
Consumer Protection sets out what a legitimate lender must have and do. Use it as a checklist.
- Registered on the Financial Service Providers Register. Without it, a lender cannot legally give credit. If a lender is unregistered, it cannot make you pay interest, default fees or other borrowing costs.
- A member of an approved dispute resolution scheme. Ask which one.
- Certified, licensed or authorised by the Commerce Commission, the Financial Markets Authority or the Reserve Bank, as the lender type requires.
- A disclosure statement before you sign. It must show the total to repay, including interest and fees, any security, how to apply for hardship and how to cancel.
- A written complaints procedure.
- A genuine affordability check. The lender must be satisfied you can repay without suffering substantial hardship. See responsible lending.
The high-cost credit rules
A high-cost loan is one with an annual interest rate of 50% or more. Consumer Protection lists these limits:
- Interest and fees cannot exceed 0.8% of the unpaid balance per day, averaged across the loan term.
- You cannot be asked to repay more than twice the amount you borrowed.
- Compound interest is not allowed.
- Default fees for missed payments are limited, generally to $30 or less.
These limits protect you, but they do not make a loan cheap. A loan with a rate just under the 50% line is not caught at all.
Signs of a predatory lender
- Pressure to sign quickly. Take the contract away and get advice first.
- The weekly repayment is emphasised and the total is not. Ask for the total repayment in writing.
- Unclear total debt. The contract must show what you will repay.
- Not registered, or no complaints process.
- Security over household items you already own, such as beds, cooking equipment or medical equipment. Consumer Protection says these cannot be used as security.
- Advertising that stresses certainty for beneficiaries. A lender who is careful about affordability will not promise an outcome before it has seen your numbers.
- A broker fee added to your loan when you are not using a broker.
A worked example (illustrative only)
These numbers are made up and round. They are not a quote.
Say you borrow $2,000 over 24 months. On a high-cost loan at an example annual rate of 50%, repayments are roughly $133 a month, about $31 a week, and the interest comes to around $1,200 before fees. At an example rate of 24.95% over the same term, repayments are roughly $107 a month, about $25 a week, and the interest is around $560.
The weekly gap is only about $6, which is easy to miss when a lender talks only about the weekly figure. The total cost is more than double. Compare the total repaid, using the repayment calculator.
Before you apply anywhere
- Ask whether the lender considers benefit income, and which payments it counts
- Check it on the Financial Service Providers Register
- Ask for the total repayment and all fees in writing
- Compare at least one other option, including a community lender
- Book a free budgeting call if money is tight (MoneyTalks, 0800 345 123)
Pawn loans and free first loan offers
Some lenders that welcome benefit income offer pawn loans or a free first loan. They deserve a second look before you use them for a car.
A pawn loan is secured on something you hand over, such as jewellery or electronics. If you cannot repay, you can lose that item, so only offer something you could live without. A free first loan offer covers the first loan only. Later loans carry normal fees and rates, and an unsecured personal loan over a long term can cost far more than the amount borrowed once establishment and payment fees are added.
Ask for the disclosure statement before you sign. The Consumer Protection site says it must set out the cost and any assets used as security. Then compare the total you will repay, not just the weekly figure. If a car is the goal, a loan made for that purpose, with the car as security, is usually clearer than a small unsecured loan used for a deposit.
How Fair Finance helps
We are not a lender. We take your details once and run a single soft credit check, which does not affect your score and which other lenders do not see. We then refer you to lenders on our panel that may suit your situation. A hard check only follows if you choose to go ahead with a specific lender. If a community loan or a Work and Income payment is the better first step, we will say so. Start with the eligibility check or see how it works.
General information only, not financial advice. Rules and lender policies change, so check the official pages below.
Sources
Common questions
Which finance companies lend to beneficiaries in NZ?
Some specialist finance companies and some dealer-arranged lenders consider benefit income as part of an affordability assessment, and community lenders exist for essentials. Policies change, and nobody can promise approval, so ask each lender directly whether it considers benefit income.
Do the big banks lend on benefit income?
Mainstream banks tend to be the most cautious with benefit income, but policy varies by bank and product. If you have a long banking history and other income, ask. A decline from one lender does not mean every lender will decline.
How do I check a lender is legitimate?
Consumer Protection says a lender must be registered on the Financial Service Providers Register and belong to an approved dispute resolution scheme, and must give you a disclosure statement before you sign. A lender that is not registered cannot make you pay interest, default fees or other borrowing costs.
What is a high-cost loan?
A high-cost loan has an annual interest rate of 50% or more. For these loans, interest and fees are capped, the total you repay cannot be more than twice the amount you borrowed, compound interest is not allowed, and default fees are limited. A high-cost loan can still be very expensive.
Is Fair Finance a lender?
No. Fair Finance is a referral service. One application and one soft credit check go to a panel of approved NZ lenders. We are paid by the lender only when a loan settles, and that never changes the rate you pay.
Are there cheaper options than a finance company?
Sometimes. Good Shepherd's Good Loans are no interest and fee free for essentials, with income and other criteria. Work and Income may help with some transport costs. Both are worth checking first, and a free budgeting service can help you decide.
Is a pawn loan or a free first loan offer a good way to fund a car?
Usually not. A pawn loan is secured on an item you hand over, so you can lose that item if you cannot repay. A free first loan covers only the first loan, so read what later loans cost in the disclosure statement before you agree. Neither is a substitute for a budget that works, and a free financial mentor can help you check.
See your repayments, then get a fair rate.
One application, one soft credit check, no obligation. We match you to the lender most likely to give you a fair go.