How to Get a Personal Loan in South Africa?
A personal loan is a quick solution for cash shortage which is especially helpful in emergency situations. You can use it to pay for education, vehicle loan, furniture, medical expenses, or even for debt consolidation.
Personal loans are relatively easy to get. They’re also more flexible in terms of repayment terms and rates.
Usually, personal loans belong to the unsecured type of loan. This means you don’t have to provide a collateral to get your loan request approved.
How to get a personal loan in South Africa?
Most lenders now have online options for a loan application. You can still apply for a personal loans in South Africa by giving your creditor a call or paying them a visit on one of their branches. If you’re too busy, there’s an option to have the lender call and assist you on how to get a personal loan from them.
The most convenient way, though, is to visit their website and complete their request form. You won’t spend an hour answering the online form; a few minutes will be enough.
The amount you can borrow can be as small as R100 to as big as R150 000. Some lenders even offer bigger amounts to loyal customers who make timely repayments.
Banks may take a few days to a week to assess your application and deposit the requested amount into your account. Alternative lenders, on the other hand, can give you your money within 24 to 48 hours after receiving your application.
The average personal loan interest rate is usually cheaper compared to credit cards and other types of loans. Personal loan APRs range from 10% to 30%, depending on your credit rating. Customers who have excellent credit scores are often given lower interest rates over those who have a bad credit history.
Look for personal loans with low annual percentage rate or APR. Lenders typically show you their interest rates together with the monthly repayments you’ll need to pay for the whole term. Loan matching sites can do this for you with ease, so it’s a good option to add to your choices.
Repayment periods vary from 1 month to 5 years. Some may even extend it to 7 years or more, depending on the amount you’re borrowing.
Many lenders allow advanced repayments without penalty fees to let you pay off your debt sooner than scheduled.
What do banks look at when you’re applying for a personal loan? Lenders usually filter loan applicants using the following criteria:
– You’re a resident of South Africa and at least 18 years of age.
– You’re permanently employed with the same employer for the past 6 months.
– You’re earning a fixed amount of income every month. Some lenders look for a minimum of R3 000, while some require that you at least earn R5 000 or more every month.
– You have a bank account under your name where your monthly salary is deposited regularly.
Upon submission of your personal loan application form, you’ll be required to also forward copies of the following documents:
– Barcoded South African ID book.
– Most recent payslips, preferably from the past 6 months.
– Stamped bank statements for the past 3 months showing when your salary is deposited.
– Proof of residence, i.e. utility bills, which are not older than 3 months from the date of application. The documents should have your name and your current address on it.
Some creditors may ask for additional documents aside from these. It’s best to ask about their process on how to get a personal loan to make sure you get all the requirements right.
Where can I get a personal loan?
The best place to get a personal loan is from an established bank. They usually offer the lowest rates among other lending institutions.
Below are the top banks that offer personal loans in South Africa:
The advantage of banks over smaller lenders is that they usually offer personal loan protection plans. This is useful because it allows your loan to be automatically paid off in case you become unable to repay the remaining balance. Sudden death, retrenchment, and permanent disability are some of the instances covered by personal loan protection plans.
Banks usually take days up to weeks to get your loan approved. This is because they conduct credit checks to make sure you have a good rating and you have low chances of missing out on repayments.
The lengthy loan application process of banks is also the reason why alternative lenders are thriving in the country. For many South Africans, the best personal loan lenders are the small creditors who offer quick cash with flexible terms, in return for higher interest rates.
Banks and other lenders rarely offer personal loans for self-employed individuals. Self-employed customers have varying monthly income which makes them a high-risk loan applicant. With their erratic income stream, there may be instances when they won’t be able to pay the loan on time.
Alternative lenders are typically more amicable in accepting first-time applicants for personal loans who usually have no credit history yet. A lot of them also offer personal loans for blacklisted individuals. However, expect stricter rules to be imposed on your loan term if you belong to either of these categories.
Tips when applying for a personal loan
Here are some personal loan application tips that can help you prepare when borrowing money from a financial institution:
– Take note of the required documents listed above. Have them ready before you even make a call or forward your application form online.
– Compare interest rates from different lenders to make sure you get the best rate suitable to your financial capability.
– Make sure that you can repay on time the amount you’re borrowing. Lenders have a threshold on how much you can borrow but you shouldn’t depend on this computation. Loan repayments should be treated like any other expense and should be included in your monthly budget to avoid missing out on them.