A loan shouldn't be a swim with sharks

Loans can often be a leg-up for the cash-strapped but can just as easily bring you to your knees, says Kiwibank spokesman Bruce Thompson.
However, there are vital strategies to help would-be borrowers avoid some common pitfalls on the way to consolidating debts or enabling a major purchase that is otherwise out of reach, he said.
Mr Thompson is aware of reports about mobile loan sharks in Auckland who offer unsolicited loans with interest rates of more than 700 per cent.
"Those interest rates just make me shudder and what's happening is that those lenders are preying on vulnerable people. They're offering what looks like an instant solution to a shortage of money, but the consequences are devastating."
A bill from Labour MP Carol Beaumont to regulate loan sharks and their interest rates was voted down by National and ACT in July.
"When someone offers you money that you haven't actually asked for, look at it closely so you know precisely how much you are going to have to pay back," Mr Thompson said.
Bank interest rates are typically lower than finance houses and "corner store lenders" that carry higher levels of risk and consequently higher rates of interest.
Mr Thompson said bank loan interest rates vary and were mostly formulated according to the risk profile of the borrower - your income, previous credit history and other debts.
Loan obligations must be clear and borrowers should make themselves aware of contract clauses, including establishment fees and early repayment charges.
"If you're thinking about taking out a personal loan, think about it very carefully and read the documentation very carefully.
"Take a couple of days to consider it and even get somebody who knows about money to look at the deal you're going to go into and that it's not going to lock you into something that will bring you to your knees."
DOS & DON'TS
When it comes to taking out a personal loan it pays to shop around - look for the best deal and read the fine print.

Always ask about the total amount repayable (TAR), including interest charges and any additional fees like early repayment charges or establishment fees.
Don't take out the first payment protection insurance (PPI) you're offered to cover your loan repayments if you're unable to meet them. Shop around for the cheapest deal.
If you plan to apply for a personal loan, it's crucial you check your credit rating first.
Don't take out a loan without considering alternatives. If you don't need to borrow a large sum of money you may find using a credit card offers better value.