What is a Personal Loan?
Personal loans are a type of consumer loan that can be used by people to consolidate debts, make home improvements, fund education or other personal needs. Personal loans are also known as unsecured loans, because they don’t require a collateral or security in order to be granted.
A personal loan is an agreement that is made between you and the lender for repayment of a loan. The repayment period can vary from 15 days up to 30 years depending on the length of time agreed upon with the lender. Personal loans have interest rates and fees associated with them, which will be disclosed by lenders before the loan is granted.
There are two main types of personal loans: Installment and pay-day. The repayments for an installment loan will be made in regular monthly installments until the entirety of the loan is repaid while pay-day loans last one month and usually have a high-interest rate attached.
The Different Types of Personal Loans in South Africa:
Installment loans:
Installment loans are considered one of the most popular types of personal loans in South Africa. This is because it has a lower interest rate compared to the other types of personal loans. These are usually given for large amounts with different repayment periods that could range from between 12 months to 104 months. Repayments can either be made every month or on an annual basis. The maximum interest rate for these type of personal loans is 60%.
Pay-day Loans:
These are short-term, unsecured and small-amount loans that last only for one month but have high rates of interests attached to them. The borrower must repay the loan before the end of the month in order to save on interest. This is a very high-cost type of personal loans due to its extremely high rates.
Student Loans:
Student loans are granted for educational expenses after completion. They are long-term loans, ranging from 12 to 30 years, which require payment of fixed monthly instalments. In South Africa, most companies and banks offer student loans and these are normally found in combination with other services such as personal loans or credit cards. The interest rate for these types of student loans is set by government regulations which generally varies from 5% to 16% p.a., depending on individual circumstances.
Mortgage loans:
This is a type of loan in which the borrower has to repay a specific amount every month until the original amount he or she borrowed has been paid off. The main difference between this and other personal loans is that it has collateral attached to it – the house -which is owned by the borrower and will serve as security for the loan. The interest rate for this type of personal loans is fixed by government structures, with a maximum interest rate of 60% p.a. This is generally not a high-cost type of loan since it does not have any additional costs attached to it.
Online Loans in South Africa
Online loans in South Africa are getting more and more popular. The increased cash flow in the country has most likely led to this phenomenon, as people have more disposable income to use for loans. There are many websites where you can apply for a loan online, but it is important that you know how they work before signing up.
This article will help you get started and assess whether or not an online loan is for you! We will go over the positive aspects of taking out an online loan as well as the negative ones so that everything is laid out on the table, without any surprises along the way.
Before we start, it is important to note that online loans are useful for short-term needs like paying for groceries, vacations, or debts. This is a common misconception about getting an online loan. You may have an emergency situation that does not warrant a traditional loan or a bank financing option, but you should still avoid taking on large amounts of debt because doing so entails serious risks.
The Pros of an Online Loan in South Africa:
It Is Quick and Simple – Getting approved for an online loan should take less than 15 minutes and has the same amount of paperwork as applying for a cash advance at your bank. It may take a little longer for the money to be deposited into your account, but this is only temporary: you will receive it the same day as your initial payment.
The Interest Rate – The interest rate on approved loans are usually very low and will depend on your credit score. There are many lenders who offer fixed rates, which means that their loans do not change with time or situations. You only pay a certain percentage of your original loan amount every month and there are no hidden fees like those of home loans.
Leaving Bad Credit Behind – An online loan is one of the best options if you have bad credit or if you want to improve it quickly. This is because you are not filing any paperwork to the public, and your loan remains private until you completely repay it.
There is No Commitment – Many people are worried about committing their finances to a loan because it means they do not have direct access to cash anymore. This is certainly true for bank loans or bad credit loans, but an online loan does not entail any form of commitment. You can use the money in a matter of minutes and then pay it back as soon as you get paid on the same day. The cost for this type of convenience is lower than most other loans and extremely convenient if you really need money last minute.
The Cons of an Online Loan in South Africa:
It Is Not Available Everywhere – If you want to get an online loan, then you will have to look for a lender that is available in your area. You can find these lenders by searching for the best online loans in South Africa or even using your favorite insurance comparison engine, like BetterMoney. Since BetterMoney is one of the most trafficked Insurance Comparison Engines in South Africa, it is very effective at bringing everything all together into a single place, including lenders who are offering online loans.
It Requires Internet – Many people think that applying for an online loan is super easy and convenient. However, this is not always the case: many times you will have to use an internet browser like Safari if you want to apply for a loan online. This might sound like it is not a big deal, but some people do not even have money for their internet due to the rising costs associated with living in South Africa. If you do have access to an internet connection, then there is still a possibility that you will have to send your application through the mail. This can be inconvenient, especially if you do not want to leave your email address or online banking information in the mailbox of another person for long periods of time.
It Can Take Up to 5 Days to Get Approved – It is important to note that applying for an online loan and getting approved are two different things. Just because you apply for a loan does not mean that you will be accepted immediately. This is especially true if it is your first time using an online loan or lending service of this type. Getting approved can take three to five business days, so it is important to plan ahead of time before taking on any type of debt like this.
Comparing Online Loan Providers
Here are tips for comparing online personal loans:
- Apply for Loans Online – There are many online lenders that provide a range of personal loans. So it is important to apply for loans online so that you can get quotes from different lenders.
- Understand The Financing Conditions – Compare the interest rate and conditions of each lender before signing up for the loan. If you are going to borrow money for a longer term, then you should choose a lender that has a lower interest rate than others. Lenders usually do not charge any fee in order to process an application or undergo credit checks; this is why comparing loans by interest rate and fees becomes so important.
- Read The Loan Agreement and Disclose Any Financial Indebtedness – Before you sign the loan agreement, you should read it thoroughly. If there is something written that you are not able to understand then ask the lender to explain it to you. Your lender should also disclose any financial obligations with other lenders, so that they can check for any outstanding debts on your part and let you know if there are any adverse effects on your application.
- Read The Fine Print – Make sure that you thoroughly read all the details when deciding whether or not to sign a loan; many times, there are hidden costs and obligations with each lender.
- Who Is Your Lender? – Before signing any documents or signing up for any loan, you should have a basic understanding of who you are dealing with, what their reputation is and why they are in business in the first place. It is also important to know the qualifications of your lender and make sure that their staff have been properly trained.
Personal Loan Providers in South Africa
Capitec Loans – Capitec provides personal loans of up to R250 000 over a period of 72 months. The maximum monthly repayment is calculated according to the borrower’s income.
African Bank – African Bank Loans offers personal loans of up to R250 000 over a period of 5 years. The maximum monthly repayment is calculated according to the borrower’s income.
FNB Personal Loans – FNB Personal Loans offers personal loans of up to R350 000 over a period of 5 years. The maximum monthly repayment is calculated according to the borrower’s income.
Nedbank Loans – Nedbank offers personal loans of up to R350 000 over a period of 5 years. The maximum monthly repayment is calculated according to the borrower’s income.
Old Mutual Loans – Old Mutual Loans offers personal loans of up to R350 000 over a period of 5 years. The maximum monthly repayment is calculated according to the borrower’s income.
Absa Personal Loans – Absa Personal Loans offers personal loans of up to R350 000 over a period of 5 years. The maximum monthly repayment is calculated according to the borrower’s income.
No matter what type of loan you are looking for, it is never too early to start looking for a loan. Personal loans are an excellent way to make sure you can take care of some important things in your life. Compare interest rates and offers today using BetterMoney’s Loan Comparison Engine.