How a $3,000 Loan Can Cost You Thousands
From Aaron’s YouTube: “Crazy that this is even allowed!!!”
Video not loading? Watch it on YouTube
Posted 29 April 2026
The short version
- A $3,000 loan with 47.6% interest left a client paying just $300 off in 7 years.
- Extremely high-interest loans can keep you in debt far longer than expected.
- Always check the full terms and interest rates before taking out any loan.
- Small amounts borrowed can become big financial burdens if rates are predatory.
The Shocking Reality of High-Interest Loans
Aaron recently reviewed a client's debt situation and was stunned to find a $3,000 loan charging 47.6% interest. Even more alarming? Seven years after taking it out, they'd paid less than $300 off the principal. This isn't some obscure lender either - this rate was publicly listed on the provider's website.
When you do the math, you realise why the debt barely budged. At that interest rate, the borrower would need to pay over $1,400 annually just to cover interest, with nearly nothing going toward the actual $3,000 they borrowed.
Why Loans Like This Exist
These types of high-interest loans often target people who need quick cash or who struggle to get approved elsewhere. The provider banks on borrowers underestimating how brutally compounding interest works at these extreme rates.
While $3,000 might seem manageable, at nearly 50% interest it becomes a debt treadmill. The loan's structure means you could pay several times the original amount before clearing it, especially if making minimum payments.
Protecting Yourself from Debt Traps
Aaron's client likely didn't realise how punishing that interest rate would be long-term. That's why it's crucial to calculate the full cost before borrowing - not just the weekly repayment amount but the total interest over the loan's life.
If you're considering any loan, especially from non-traditional lenders, ask two key questions: What's the annual interest rate (not just weekly amounts), and how long will it realistically take to pay off? That $3,000 'quick fix' could end up costing $10,000+ if you're not careful.
This is general information, not personalised financial advice. For advice on your situation, talk to Aaron.
Keep learning
One spreadsheet beats a hundred good intentions
Most people saving for a first home cannot answer two basic questions: exactly how much do I have, and exactly when will I have enough. A spreadsheet answers both.
How to budget for your first home
Work backwards: target house price, minus KiwiSaver and any help, equals the cash you still need. Divide by your weekly surplus and you have your timeline.
Bank statement red flags the lender will spot
Aaron shows a humorous, playful side in this candid video.
3 Bank Statement Red Flags That Could Slow Your Mortgage Approval
Frequent cash withdrawals make lenders question what you're spending on.
The Real Cost of Adding a Car to Your Mortgage
A $175,000 car added to your mortgage costs an extra $215/week at current rates.
How April's KiwiSaver Changes Affect Your Mortgage
KiwiSaver contributions rise to 3.5% (employee+employer) from 1st April 2024.
The reality of being a top 1% earner with a mortgage in NZ
Earning over $270,000 puts you in New Zealand's top 1% of income earners.
Don't forget to pay tax on flatmate or boarder income
Flatmate and boarder income is taxable and must be reported to the IRD.
Why Term Deposit Rates Are Dropping With Mortgages
Term deposit rates fall when mortgage interest rates drop.
Why cash advances hurt your mortgage approval chances
Banks view credit card cash advances as red flags because they signal you're spending money you don't have.
The sneaky credit card interest rate trap
Some credit card companies offer lower interest rates when you try to pay off your card, as an incentive to keep it open.