Are peer-to-peer loans better than traditional finance options?

peer to peer loans vs traditional finance
Peer-to-peer loans vs traditional finance

Peer-to-peer lenders are taking New Zealand by storm as more and more people are skipping the bank and looking for better deals that cut out the middle man.

With this trend in mind, we’re going to take an in-depth look at whether peer-to-peer loans are better than traditional finance options.

What are peer to peer loans?

Peer-to-peer loans are simply loans offered to private consumers and businesses via P2P platforms. It is essentially a loan offered to someone who needs it by someone who is looking to get a good return on their investment.

Harmoney is currently the leading peer-to-peer lender in New Zealand and has, to date, facilitated more than $1 billion worth of loans. They started their operations in 2014 and were the first P2P platform to be registered in New Zealand.

How do peer-to-peer loans work?

P2p loans are quick and simple and work just like any other traditional or online loan. A borrower simply visits the platform and opens an account, after which they make a loan application. The platform will then review the application and assign an interest rate to the borrower.

Individuals who are registered as investors are then able to see this loan request and, choose to invest their money in funding the loan. The borrower gets a loan. The investor gets their returns and the platform earns their fees too.

Although most loans available on a peer-to-peer platform are unsecured, borrowers may offer security to be able to secure better rates or larger loan amounts. For example, Harmoney currently accepts motor vehicles as security only but Lending Crowd offer a range of other loans.

Borrowers are still subject to a credit check and must undergo an affordability assessment before they are approved for credit. In addition, the loan application is similar to one that any bank would require a borrower to complete requiring all of you personal, employment and contact information as well as details on your current income and expenses.

Benefits of using a peer-to-peer platform for borrowers

  • Interest rates can be lower than that offered by banks.
  • Bank grade security is guaranteed.
  • Quick online loan applications.
  • Less stringent lending criteria for businesses.

Benefits of investing your money on a P2P platform.

  • Choose your level of risk.
  • Start with a small investment or a large investment.
  • Better returns on your investment than you’d get from a bank.
  • Bank grade security is guaranteed.

Are interest rates more competitive than those offered by traditional lenders?

For those that have a good credit score the answer is yes. Harmoney currently offers personal loans from 6.99% and the Lending Crowd are offering loans with interest starting at 6.69%.

With the exception of the Co-operative Bank who also offer a low rate personal loan option, these interest rates are significantly lower than any rates offered by the five major banks in New Zealand.

Why New Zealand businesses are turning to peer-to-business loans

Peer-to-business loans are becoming an increasingly popular option for New Zealand businesses. This is not only due to the better interest rates and simple online loan application processes but due to the more flexible lending criteria.

Some p2p platforms will allow businesses who have minimal credit history to access credit. This will allow them to expand their business operations or improve cash flow in a simple, affordable and easy to manage way.

New Zealand’s leading peer-to-peer lenders


Harmoney was New Zealand’s first peer-to-peer platform and the first to be registered with the Fianncial Authority and are currently the leaders in P2P lending.

They currently offer unsecured personal and business loans with rates ranging from 6.99% to 29.99% which range from $2,000 to $70,000. Loan terms are either a 3 year term or a 5 year term. One thing that stands out about Harmoney is that they also lend to those with a higher risk due to a lower credit score.

Lending Crowd

The Lending Crowd offer personal and business loans from $2,000 to $200,000 with an interest rate range of between 6.69% and 18.45%. Their terms are either a 3 year or 5 year option. Lending crowd has stricter lending criteria than Harmoney and approve only a small percentage of loan applications received.


Squirrel offer secured and unsecured loans from 7.95% and up to $70,000 with a 1 year, 3 year, 5 year or 7 year loan term which allows borrowers and investors slightly more flexibility. They only offer personal loans and have no business loan options.

Traditional Personal loans in New Zealand

With a vibrant banking and lending sector, New Zealanders have a wide range of options available to them when it comes to personal loans. The five major banks which include ANZ, ASB, BNZ, Kiwibank and Wespac all offer highly competitive personal loans starting from 12.65% but, these do not beat the best rates offered by the country’s leading peer to peer platforms.

Even some of the leading credit unions and building societies in the country are unable to meet the best rates offered by P2P lenders. For example, NZCU, one of New Zealand’s leading credit unions offers personal loan rates starting at 13.95%.

Comparing loan options before applying

Now that we know that for those with a good credit score, a peer-to-peer option is likely to offer the best interest rates let’s consider loan comparisons for a minute. If you take the time to visit one of the handful of loan comparison websites we have available in New Zealand, you will be able to compare a range of loan options before you even apply!

The benefits of comparing loan options is quite long but the main reason is to save money by comparing interest rates as well as service and maintenance fees and to find the lenders that offer your ideal loan amount. In some instances comparing can help you find a lender that will be willing to work with you if you need a bad credit loan due to a poor credit record.

Also remember that even though the interest rate of a loan is one of the most important factors to consider when taking out a loan, other features and benefits should also be considered and are sometimes just as important, if not more so. Such factors can include things such as loan amounts and loan term flexibility.

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