How interest rates and borrowing limits work
Harmoney’s interest rates
We believe risk-based interest rates are fairer and more transparent.
Risk-based interest rates is a simple concept: the less risky it is to lend to a borrower the lower their interest rate should be, and vice versa - higher rates when lending is risker.
There’s some risk involved in all lending, but the amount of risk varies from person to person. Traditionally, lenders have used a shortcut to account for this variability: just charge everyone the same rate. The problem with that approach is some people end up paying a higher interest rate than they should, and some people are turned away when they shouldn’t be.
Harmoney has been an early pioneer in rate-for-risk interest rates in New Zealand and Australia.
How interest rates are calculated
In general, there are some common factors that are considered. A key one is a person’s credit score, which is an indication of how a person has managed credit in the past (their credit history). Other factors that can impact interest rates are:
- Stability of employment
- Stability and type of residence
- Financial behaviour
- Demographic profile
Harmoney’s credit rules set a maximum borrowing limit for different interest rates and is part of our credit risk assessment. However, this isn't the only factor in borrowing limits. Borrowing limits also reflect a monthly repayment the borrower can comfortably repay. This is in alignment with our lending policy, and Responsible Lending principles, which are designed to ensure loan offer limits will not lead to financial stress.
For a quick estimate of how much money you can borrow and what your repayments will be like you can use our personal loan calculator.
Total cost of borrowing
To demonstrate the cost of interest over the term of a loan,you can download a detailed Excel or PDF file which shows the total cost of borrowing for a range of example loans over 3 and 5 year terms. These include different loan rates and limits.