Secured loans in NZ: what to know before you borrow against an asset
A secured loan can be one of the cheapest ways to borrow a larger amount, because the lender has an asset to fall back on if things go wrong. That reduces their risk and typically brings your rate down. But it also means the asset is at stake, so the decision deserves care.
What is a secured loan?
A secured loan is a personal loan backed by an asset you own, most commonly a vehicle or boat. The lender registers a security interest in the asset through the Personal Property Securities Register (PPSR). They don't take possession of the asset, but they hold a legal claim over it if repayments aren't met. In exchange, you typically get a lower interest rate and access to a larger loan amount than you'd get on unsecured lending.
Secured vs unsecured: what's the trade-off?
The trade-off is straightforward. Secured loans in NZ start from 8.99% p.a. (AIR) and can go up to $250,000 over terms as long as 84 months. Unsecured loans start from 10.99% p.a. and have lower maximum amounts. The lower rate comes at a real cost: if you default, the lender can repossess the asset. If you have a suitable asset and the repayments comfortably fit your budget, a secured loan can save you meaningful money over the life of the loan. If either piece is uncertain, unsecured may be the safer call.
What assets can be used as security?
The most common asset used as security in NZ is a registered vehicle. Boats, jetskis, caravans, motorhomes and business equipment can also be accepted depending on the lender. The asset generally needs to be owned outright or near-outright, because if there's already finance registered against it, the existing lender has first claim. The asset's age, condition and market value are all considered as part of the assessment.
What happens if I can't make repayments?
If you fall behind on a secured loan, the lender can eventually repossess the asset used as security to recover what's owed. Before it gets to that point, lenders in NZ are required by the CCCFA to work with you on hardship arrangements where reasonable. But repossession is a real risk, which is why it's essential the repayments comfortably fit your budget before you sign. Our team will walk you through affordability as part of the assessment.
How much does it cost to use Lending Room?
If your loan is funded, a broker and introducer fee of up to $1,500 (GST inclusive) applies. Lender establishment fees of up to $450 may also apply, depending on the lender. Every fee is disclosed to you before you commit, so there are no surprises. We only get paid when you go ahead, which keeps our interest aligned with finding you a deal worth taking.
What protections do I have as a borrower?
Lenders and brokers in NZ are bound by the responsible lending principles in the Credit Contracts and Consumer Finance Act 2003. Section 9C sets out the lender responsibility principles, including making reasonable inquiries so the loan meets your requirements and that you can repay without substantial hardship. The Commerce Commission enforces these rules. Any security interest registered against your asset is public record on the PPSR.