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What is a Debt Consolidation Loan?

A debt consolidation loan is a fixed term, fixed interest rate, Secured or Unsecured loan used to consolidate multiple loans or credit and store cards into one fixed manageable loan repayment.

What you will learn in this Debt Consolidation Guide:

  • How a Debt Consolidation loan works
  • Benefit of a Debt Consolidation loan
  • What security can be used
  • Debt Consolidation loan terms
  • How to apply and qualify
  • The difference between Secured and Unsecured

How does a Debt Consolidation loan work?

A debt consolidation loan is a personal loan used to combine multiple loans, credit cards or store cards and bills; you borrow an amount of money and Pioneer Finance will use the money to repay the debts being consolidated. You then repay the loan amount – plus interest and fees over a fixed term. Repayments can be calculated weekly, fortnightly or monthly to suit your regular income.

The Benefit

Often consumers have lots of small loans, credit cards or store cards as the purchases these products were used to buy were made at different times during the year. They all come with varying interest rates and fees and on their own the repayments seem small but when you add them together you can be paying large amounts of fees and interest. A couple of examples are below:

Example 1

Matthew has a large loan some Credit cards and Store cards which he has consolidated into one easy loan as follows:

LoansCurrent BalanceExisting Monthly repayments
Loan 1$42,257.99$1278.33
Hire Purchase$2,342.05$216.66
Credit Card 1$1,994.38$130.00
Credit Card 2$1,008.86$130.00
Store Card 1$4,037.25$130.00

After consolidating these debts Matthew now has a monthly repayment of $1,193.53 which is a monthly saving of $691.46 and will have his debt paid off in 7 years.

Matthew is smart as he was comfortable paying $1700 a month on his loan rather than the minimum payment which now reduces the term of his loan to 4 years.

Example 2

Eric and Simone have a few credit cards and store cards that they have been paying the minimum payment for a while now and the balance doesn’t seem to be going anywhere. The debts have been consolidated as below:

Credit & Store CardsInterest rateBalanceMonthly payment
Credit Card 125.99%$5,532.00$276.60
Credit Card 220.95%$1,607.00$80.35
Credit Card 319.99%$6,000.00$300.00
Store Card 129.95%$3,000.00$150.00
Store Card 225.99%$2,000.00$100.00

After completing a Debt Consolidation loan at an interest rate of 18.95% they now have a monthly repayment of $577.73 which is a monthly saving of $329.22 and are happy knowing these debts will be paid off in 4 years.

Should I consolidate all of my debt?

Sometimes you won’t benefit from consolidating all of you debt and you are better of leaving it where it is, like interest free loans these are not costing you any interest. Other examples are you might have a lower interest rate or you don’t have long to go before the loan is paid.

What security can be used?

We can use the following securities:

  • Property
  • Motor vehicles – Including cars, trucks & motorbikes
  • Boats & Jetskis
  • Business assets
  • Household chattels

For some applicants we may be able to help you with an unsecured loan.

Personal Loan Terms

The loan terms we are able to offer depend on the security offered. Below is a table detailing the terms we can offer:

SecurityMaximum term
Property7 Years
Motor Vehicles less than 10 years old4 Years
Motor vehicles older than 10 years3 Years
Motor vehicles older than 18 years2 Years
Boats & Jetskis3 Years
Chattels2 Years

How to apply

You can apply for a debt consolidation loan with Pioneer Finance if you are:

  • Over the age of 18; and
  • A New Zealand Citizen, Permanent Resident or in some instances on a work visa; and
  • Are employed or have a regular source of income i.e Job, Self-employed or receive a benefit

You do need to show that you have the affordability for the loan and that you are who you say you are. You can do this by providing the following:

  • Proof of Identity – i.e passport or driver’s license
  • Proof of Address – Bank statement, utilities bill or a letter from a government department
  • 3 Months bank statements

Depending on the security offered for the loan we may require further information such as rates notice, mortgage statement’s or proof of purchase.

What checks will you complete using my information?

Depending on the security offered we will do checks with the following registers:

  • Credit checks with 1 or more of the following Equifax, Centrix or Illion
  • PPSR
  • Land online
  • New Zealand transport
  • Driver check

Don’t worry if your credit check has a couple of bumps and bruises we may still be able to help you.

Debt Consolidation Fees and Charges

Debt consolidation loans will have various fees attached, which may include:

  • An establishment fee once you loan is approved and you have accepted the terms
  • Ongoing monthly account fees
  • Security registration fees
  • Caveat registration fee
  • Penalty fees for late payment
  • Early settlement fee
  • Caveat removal fee
  • One-time broker fees if using a finance broker

Some of these fees will be charged to the loan upfront or are calculated in your weekly, fortnightly or monthly installments. Other fees can be charged at the end of the loan term such as early settlement fees or if you used your property as security a caveat removal fee can be charged.

For more details on our fees and charges go to our Interest rates and fees page in the important information section.

What’s the difference between a Secured and Unsecured loan?

When getting a Debt Consolidation loan it is important to look at all of the costs and fees and often using security for your loan can reduce the interest rate offered. Secured loans may take a little longer to process but are of lower risk to the lender and can reduce your overall cost.

Debt Consolidation Loan Repayment Example:

Amount Borrowed $20,000.00

Establishment Fee $595.00

Payment Protection Insurance $2,294.16

Caveat Fee $165.00

Total including fees and insurances $23,054.16

Interest Rate 14.95%pa

Monthly Account Fee $12.00

Loan Term 60 Months

59 Monthly repayments of $559.46 plus 1 final repayment of $559.28

The above is an example of a common loan request and gives you an indication of what the monthly loan repayments will be. Your establishment fee may be different depending on the security used and the time taken to process your application. We would also like to point out that the Payment Protection Insurance used in this quote is not compulsory.

Debt Consolidation Loans summary

In summary, debt consolidation loans with Pioneer Finance:

  • Are fixed-term, fixed-rate secured loans
  • Are arranged online, over the phone, in one of our two branches in Wellington & Auckland or through a finance broker
  • Repayments can be made weekly, fortnightly or monthly
  • Interest rates range from 6.95%pa to 16.95%pa
  • Loan terms can be from one year to seven years in length
  • Can be used to consolidate personal loans, credit cards, store cards or any bills that need to be caught up

Debt Consolidation FAQ

If you are over the age of 18 (up to the age of 21 you may require a guarantor), a permanent resident of New Zealand, earn a regular income, and can demonstrate the ability to repay the loan, you may qualify for a debt consolidation loan.

We offer loans from $1,000 to $100,000 on a debt consolidation loan in New Zealand. The amount we lend does depend on the security offered for the loan. The more security offered the better chance we will be able to lend the amount you require. We will also need to check your affordability and credit profile.

Yes. Your credit history may not be as bad as you think. Let us do the background work and we’ll take it from there. You do need to show us that you can afford to pay the debt consolidation loan, and you will need security, and may need a guarantor.

Approval time depends on some variables:

  • How much information you provide, the more information you provide the quicker we will be able to give you an answer.
  • Larger loans tend to take a little extra time
  • Loans with property involved can also take a little longer to get approved

In saying that we do endeavour to give a same day answer on all applications received.

Yes, you can make extra repayments; or you can increase your minimum repayment to help pay your loan off earlier. We do charge a small early settlement fee of $75.

Applying at multiple finance companies will no longer affect your credit rating in New Zealand. Since October 1st 2019 every credit check done by a finance company is listed as a quote with Equifax, Centrix or Illion and will only affect your credit rating should you accept the loan offer.