A personal loan is an amount of money borrowed at a fixed rate and repaid over a fixed amount of time. Personal Loans give you the ability to consolidate debt, improve your home or pay off credit cards – even with bad credit. You can get a personal loan from a bank, credit union or online lender.
As times get tight for everyone, you may find yourself looking for a little help to get through a rough financial patch. Perhaps your car hit a pothole and you need car repairs, or a family emergency has left you scrambling for cash. Whatever your reason, you’ve probably wondered if taking a personal loan will be the right choice to help you go through the hard times. We take a look at this class of loan, and whether it’s right for you.
Why Would You Need A Personal Loan?
Personal loan belongs to a category known as microfinance. These are not intended to be large secured loans like mortgages and vehicles, and are a specific amount borrowed over a fixed time period, unlike overdrafts or credit cards. They are instead smaller fixed amounts used towards repairs, specific purchases, unexpected expenses and perhaps debt consolidation.
There are two main categories of personal loans – secured and unsecured types of personal loans where under these two, there are a variety of loans you can take advantage of, each designed for a specific purpose.
If you’re considering to get a personal loan in South Africa, it’s critical to remember that this is in no way ‘free money’.
Interest and administration charges will add up very quickly, and you’ll have to pay the original sum back plus all of these, within the agreed period, or face very strict penalties.
Interest rates are typically far steeper on personal loans in South Africa then they are on loans where there is collateral security (an asset such as a house or car), simply because they are more risky for the financer- after all, they’re simply taking a calculated risk that you can pay back the loan, they don’t have that asset to sell if you default!
Then again, they also can’t foreclose on an asset, so there are benefits too.
Only consider this type of loan if you’d like debt consolidation to restructure your payments more favorably for yourself, or if you have urgent need of fast access to money for a necessity. If you can live without what you are considering purchasing, it is better to be patient and leave it until there’s actual cash in your bank.
Consider a personal loan for occasions such as unexpected medical costs, burst geysers and other emergencies which will impact your daily life too adversely to wait out.
Because this is also a category where you may be tempted to borrow more money than is needed and spend it on things that aren’t essential or planned, it’s also critical to do your research well, choose the best loan company or bank, understand exactly what interest and fees will be charged to you, and make sure your total loan is in line with the costs you face.
Your installments should also be both affordable and manageable within your monthly budget.
What Is A Debt Consolidation Personal Loan?
The debt consolidation loan is a special case. Here you will bundle all your debt into one single loan. This is not sequestration (declaring bankruptcy) or a debt review, it is simply a restructuring of your existing debt where all the small amounts due to many institutions are paid off and instead you make payments towards one long-term loan at a more manageable rate for you.
Typically, you will manage to make your debt consolidation loan a repayment amount that’s lower than you were paying before, and you may opt for a longer repayment period to give yourself breathing room and reduce the monthly financial burden.
How Do Personal Loans In South Africa Work?
The amount and length of payment for a personal loan can vary widely, depending on the institution and your reason for taking the loan. There are payday loans, where small amounts (typically under R10,000) which are loaned with the understanding these will be paid back within one or two pay cycles. Then there is the more typical long-term personal loan, where you will loan a larger amount (think R15,000- R500,000) over a repayment period of 1, 3, or 5 years.
Normally, the longer the loan period the less the interest rate, but remember – the loan is always more expensive the longer you hold it for, so choose your terms carefully. Don’t just opt for the lowest repayment rate and longest time! Your credit history, and whether you are blacklisted, will play a large role in determining your interest rate, too.
Applying For A Personal Loan
Most South African lenders will want to see your ID, proof of residence, at least 3 months of payslips and possibly your bank statements too.
People who are self-employed looking for personal loan will require further proofs, or may not be eligible for certain loans.
Be sure to check your credit history before applying (How to check your credit score), and choose only a few institutions to approach that offer product closest to your needs as making multiple applications, especially if rejected, may affect your credit record and reduce the chances of getting your loan.
Once you’ve found the right lender, be sure you understand the fees you will be charged before you accept – check to find out if there is a penalty fee for early payment, too, as you don’t want any unpleasant surprises!
Top Personal Loan Companies in South Africa
|Loan Company||Description||Amount Range||Repayment Period||Links||Apply|
|ABSA Personal Loan||No matter what your plans are, Absa got a personal loan that suits your needs.||R250 to R350 000||12 to 84 months||More Info||Apply Now|
|Boodle Loans||Getting a personal loan has never been this easy. Boodle will help you get your loan in the bank quickly.||R100 to R4 000||2 to 32 days||More Info||Apply Now|
|DirectAxis Loans||DirectAxis Personal Loan offer up to R200 000 is a convenient way to take care of your personal and family needs and goals. ||R5 000 to R150 000||24 to 72 months||More Info||Apply Now|
|FinChoice Loans||Let the FinChoice Loan be the simple solution to your problems. ||R8 000 to R40 000||6 to 24 months||More Info||Apply Now|
|Old Mutual Personal Loans||Make your dream real. Apply for a personal loan in less than 10 minutes. ||R500 to R200 000||3 to to 84 months||More Info||Apply Now|
|Sanlam Personal Loans||Apply for a fixed rate personal loan of up to R200 000 through Sanlam South Africa. ||R5 000 to R200 000||24 to 72 months||More Info||Apply Now|
|Wesbank Personal Loans||Get easily a personal loan from WesBank, offering no hidden costs, very low interest rates and flexible repayment term.||R5 000 to R150 000||24 to 72 months||More Info||Apply Now|
|Woolworths Personal Loans|
Get a Resolving Personal Loan from Woolworths. With low interest rates and a simple online loan application from Woolworths, getting a personal loan has never been this easy.
|R2 000 to R70 000||160 days to 60 months||More Info||Apply Now|
You should now be well on the way to finding the perfect personal loan for you through our helpful MoneyToday service – Good Luck!