Competition for pre-Christmas debt

media release

FOR IMMEDIATE RELEASE

Competition for pre-Christmas debt

CANSTAR releases Personal Loans Star Ratings Report, looking at 27 products from 10 lenders.

It's a high-spend time of year and Canstar's research of 27 personal loan products across 10 lenders has found that there is strong competition in the market, with advertised rates as low as 9.90% for a secured personal loan and 9.99% for an unsecured loan.

"While our research found that personal loan rates, similar to credit card rates, don’t tend to be as reactive to changes in the official cash rate as, say, home loans, personal loan rates are nevertheless quite competitive at the moment," said Canstar General Manager – New Zealand, Jose George.

"Over a 12 month period from September to September, we saw a 3.3 percent drop in the lowest unsecured personal loan rate on our database and in fact unsecured rates now rival secured rates. That type of drop in rates can make a significant difference to overall loan costs."

This is also the first year that a peer to peer lender has received a five star award for Outstanding Value, with P2P platform Harmoney, in its first year of operation, stepping up and providing outstanding value for unsecured personal loans for customers with an A1 – A5 credit rating.

"Peer to peer platforms are new to New Zealand, and with more players entering the market in the coming months it will be interesting to watch the development of the industry over the next few years," said Mr George. "They will certainly be a competitive pressure on the traditional institutions."

Currently on Canstar's database, the minimum and maximum personal loan interest rates on offer are:

2015 Personal Loans Advertised Interest Rates

“There is a significant spread between the lowest and highest rates charged, so it’s important to shop around for the rate and features you want,” said Mr George.

Justine Davies, Canstar's Finance Editor, warns consumers not to be seduced by low rates alone. “Yes, current personal loan rates are reasonably low, but don’t get into debt unless you have to," she said.

"At this time of year it's tempting to spend just a bit more money than we can really afford, whether it's for Christmas presents, a holiday or just celebrations. Our credit card balances outstanding tend to peak in December; in fact over the past ten years we've seen a 40 percent increase in the amount outstanding on our credit cards, against 20 percent inflation and minimal population growth. We're comfortable getting in to debt but remember - unless it was money you were going to spend anyway, you shouldn't use competitive rates as an excuse to splurge even more.”

The five star products

Canstar's annual personal loans analysis looked at 27 products from 10 lenders to determine which ones offer outstanding value for money. The five star-rated products are as follows:

Unsecured Personal Loans

Secured Personal Loans

Details of the products are in the attached Star Ratings Report.

ENDS

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