If you’re looking for interest payday loans online, you may be aware that lenders charge different interest rates on their loans.

Some charge high interest rates, while others are more affordable.

When you take out a loan, you want the lowest interest rate you can get to minimise your loan costs.

Keep reading to learn more about the difference between high-cost and low-cost lenders, and how you can get a better interest rate.

What are interest rates?

The interest rate is the percentage of the principal (the amount of the initial loan) the lender charges the borrower.

Interest rates are usually charged annually, or daily.

For example, if you were charged 10% interest on a $1,000 loan, over one year you would pay $100 in interest.

What is a payday loan?

A payday loan is a short-term, small loan for when you need a little extra cash.

You can use them when you're between pay days and need a little money to tide you over until your next pay arrives.

You can take out a payday loan to cover rent, bills, or just for some extra spending money.

Learn more about payday loans.

Not all payday loans are equal when it comes to cost - some charge very high interest rates, while others will cost you less.

Before you take out a payday loan, make sure you understand whether it’s a high-cost or a low-cost loan and how much it’s going to cost you in interest and fees.

What is a high-cost lender?

In New Zealand, “high-cost” lenders charge more than 50% interest per annum.

Before 2021, lenders could charge as much interest as they liked, but new restrictions have put limits on how much interest a lender can charge you.

Interest and fees on a high-cost loan can never be more than 100% of the initial loan amount.

For example, if you take out a $500 loan, you will only ever have to pay a maximum of $1,000, including interest and fees.

However, an interest rate of more than 50% is still very high, and you could avoid having to settle for such a high rate if you shop around.

What is a low-cost lender?

A low-cost lender charges less than 50% interest per annum.

Some lenders advertise rates of 49.5% to be able to market themselves as “low-cost”.

While this is technically true, this is still a high interest rate.

With Sweet As Money, you’ll pay 35.5% interest per annum, significantly lower than many payday lenders.

Difference between high-cost and low-cost lenders

If you take out a loan with a high-cost lender, more than half of your repayments will be going on interest alone.

This makes it harder to pay back the loan itself, and you’ll potentially be making repayments for longer.

In contrast, low-cost lenders can offer you a better interest rate, making your repayments more affordable.

How to get a lower interest rate

Generally, people with good credit history can get lower interest rates when they borrow money.

This is because from the lender’s point of view, lending to borrowers who have good credit scores is less risky than lending to people who have bad credit.

Things like being late with your loan or bill payments affect your credit score - the more late or missed payments you have, the worse your credit score gets.

When you’re in this situation, you may be forced to borrow money at a high interest rate.

The good news is you can improve your credit score by borrowing through a lender who subscribes to positive credit reporting - like Sweet As Money!

When you take out a loan through us, your prompt payments count towards improving your credit score.

Coupled with our low interest rate of 35.5%, this is a great way to get the cash you need while setting yourself up for the future.

Having access to cheaper credit (that is, getting a loan with a lower interest rate) gives you more financial freedom, enabling you to do the things you want in life.

Can you get a low interest payday loan if you have bad credit?

It’s certainly possible to get a low interest payday loan through Sweet As Money, even if you have a bad credit score.

We charge a flat rate of 35.5%, and bad credit history isn’t a deal breaker for us.

If you have regular income and can afford the repayments, your chances of getting a loan are higher.

To find out more or discuss your situation, get in touch with the team at Sweet As Money today! Or apply for your payday loan online now.