Choosing a car loan lender after bankruptcy in NZ
After a discharged bankruptcy, the question is less which brand and more which type of lender suits your situation, and what to ask before you apply. We do not name any lender as one that will lend to you, because lenders decide case by case and nobody can promise approval. A good choice comes down to cost, fairness and how many hard credit checks you trigger.
Why this page does not rank lenders
Search results for this topic are full of lists of names, each with a claim about who will say yes. A list like that cannot be true for you, because a lender’s answer depends on your income, your discharge date, the car and the loan, none of which a list knows. So instead of naming lenders, this page helps you choose a type of lender and test whether a particular one is any good.
Fair Finance is a referral service, not a lender. We help people who have been discharged, or whose No Asset Procedure has ended, and we do not refer anyone who is currently bankrupt. For timing, see how long after bankruptcy.
The five types you will run into
1. Main trading banks. Usually the lowest rates for people with clean files. They often give heavy weight to credit history, so a recent bankruptcy can be a barrier. Still worth a conversation if you have a long banking history with them and a good record since discharge.
2. Specialist finance companies. Non-bank lenders that take on higher-risk borrowers. They are the usual route after a recent insolvency. Rates tend to be higher to reflect the risk, so the comparison rate and total cost matter a great deal.
3. Credit unions and building societies. Smaller, member-based, and sometimes more willing to look at the person rather than only the file. The Insolvency and Trustee Service notes they may be more willing to open accounts for people coming out of insolvency. Membership rules and lending limits vary.
4. Dealer finance. Offered where you buy the car, arranged through a finance partner. Convenient and sometimes expensive. The dealer may earn from arranging the loan, so ask what it costs. Our guide to dealer finance versus a broker or bank compares them.
5. Referral services and brokers. They collect your details once and send them to a panel of lenders. That can cut the number of hard checks. They are paid by the lender, so ask how and whether it affects your rate. Fair Finance is a referral service and is paid by the lender only when a loan settles, which never changes the rate.
A simple way to decide
Ask which of three things matters most to you right now.
- Lowest cost. Try your own bank or a credit union first, then compare specialist rates.
- Fewest credit checks. Use a referral service that checks softly first, or choose one lender and apply once.
- Speed. Be careful. Rushing is how people end up with expensive loans, and lenders still must check affordability.
Eight questions to ask any lender
- What is the interest rate and the comparison rate?
- What is the total cost of credit over the full term?
- What fees apply? Establishment, monthly account, early repayment, late payment.
- Is the rate fixed? Does it stay the same for the whole term?
- What happens if I miss a payment? Ask about default fees and how they contact you.
- Can I repay early without a penalty? See our guide to paying off a car loan early.
- Is the loan secured against the car? Most are, which means the car can be repossessed if you default.
- Which dispute resolution scheme do you belong to?
A good lender answers all of these in writing without fuss. If a lender dodges, move on.
Checking a lender is legitimate
Before you sign, a lender must explain the contract, check affordability and suitability, and give you a disclosure statement and a written contract, according to Consumer Protection. Its page on car loans lists things to watch for:
- Fees that are not reasonable, such as setup, insurance, early repayment or credit check charges
- “Free” extras or special offers that are actually paid for through the loan
- Required insurance you may have to pay for
- Security over belongings such as beds, cooking equipment or washing machines
- A requirement for a guarantor
- A cash price on the Consumer Information Notice that differs from the contract price
Add your own checks: no fee before a loan is arranged, no promise of an outcome before the lender has seen your income, and no pressure to sign the same day. If in doubt, Consumer Protection’s advice is to leave the car at the lot and seek independent advice.
Under the Credit Contracts and Consumer Finance Act, lenders must check that the loan is affordable. A lender who skips that step is not following the rules.
Compare two offers (illustrative only)
These figures are round and made up to show the maths, not quotes. You need $9,000 over 48 months.
- Offer A: 21.95% interest, a $300 establishment fee, no monthly fee. Repayments are roughly $283 a month. Total repaid is about $13,600 plus the fee, so about $13,900 in all.
- Offer B: 18.95% interest, a $450 establishment fee and a $5 monthly fee. Repayments are roughly $269 a month plus $5. Total repaid is about $12,900, plus $240 in monthly fees and the $450 fee, so about $13,600 in all.
B is still cheaper here, by about $300, but the gap is much smaller than the headline rates suggest once fees are counted. Always compare the total cost of credit, not the headline rate. Use the repayment calculator to test your own numbers.
Mistakes people make when choosing
- Choosing on the weekly figure alone. A low repayment over a long term can cost far more.
- Applying to many lenders at once. See how applying affects your credit.
- Not reading the fees page. Fees change the true cost.
- Skipping the PPSR check on a used car. See our guide to PPSR checks.
- Borrowing more than you need, because the car you want costs more than the one you can afford.
Cheaper options to look at before any lender
- Good Shepherd Good Loans. No-interest, fee-free loans for essentials such as a car, with criteria to meet.
- MoneyTalks (0800 345 123) for free budgeting help.
- A cash purchase of a small, reliable car.
Before you apply: a short checklist
- Discharge date confirmed on the Insolvency Register
- Credit reports checked from Centrix, Equifax and Experian (formerly illion)
- Recent payslips or bank statements ready
- A repayment worked out that fits your weekly budget
- Contract, disclosure statement and fees read in full
- Total cost of credit compared across at least two offers
Social media threads and “who can help?” posts
Searches for this topic turn up community Facebook posts where people ask who will lend after bankruptcy and strangers reply with names. Treat those as leads to check, not recommendations. You cannot tell whether a commenter is a happy customer or is paid to post, and the advice may be out of date. Before you apply anywhere, check the lender or broker against the financial service providers register, confirm which dispute resolution scheme they belong to, and read the contract.
What a broker may charge
A broker does not lend its own money. It compares lenders and passes your application on. Some brokers charge a service fee where the lender allows it, and may also be paid by the lender. Ask which, ask for the fee before you sign, and make sure it appears in the contract. The cost of the loan must be shown in the disclosure statement before you commit.
How Fair Finance helps
You give your details once, we run one soft credit check that does not affect your score, and we refer you to lenders on our panel who consider discharged applicants. A hard check only happens later, if you choose to go ahead with a lender. See the eligibility check or how it works.
General information only, not financial or legal advice. Lender criteria and rates change.
Sources
Common questions
Which lender is best for a car loan after bankruptcy in NZ?
No single lender is best for everyone, and we do not name lenders as ones that will approve you. Lenders decide case by case and nobody can promise approval. Compare the total cost of credit, the fees and the flexibility if you fall behind.
Will a main bank lend to a discharged bankrupt?
Some may consider it, but many people find specialist lenders are more open to a recent insolvency. Banks tend to give heavy weight to credit history. A bank can still be worth asking if you have an established account and a long record since discharge.
Is dealer finance a good idea after bankruptcy?
It can be convenient, and it can also cost more than finance arranged elsewhere. Ask for the total cost of credit and the comparison rate, and compare before you sign. Our guide on dealer finance versus a broker or bank sets out the differences.
How do I check a lender is legitimate?
Ask which financial dispute resolution scheme the lender belongs to, and read the contract and disclosure statement before you sign. Consumer Protection lists warning signs such as unreasonable fees, security over your belongings and a requirement for a guarantor. A lender that will not put terms in writing is a red flag.
Should I apply to several lenders to see who says yes?
It is better not to. Each hard credit check is recorded on your file, and a run of them in a short time can look like a risk. Compare lenders on terms first, then apply to one, or use a service that checks softly first.
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.