Short term loans in South Africa can be used to mitigate emergencies especially when you are certain of repaying quickly. It happens to everyone, situations occur when you need to secure a short-term loan to cater for some emergency or unavoidable circumstance. At this point, the last thing you’ll want is delay and inefficiency. With some credit providers, approval of loan applications might take days. As such, finding a solution where you get the financial service you require in the least possible amount of time is a top priority.
Financial providers noticing the importance of short-term loans and easy access, have put measures in place to ensure maximum satisfaction.
What is a short term loan?
Obtaining a short-term loan caters to temporary needs. A credit involves borrowing a capital amount and paying interest by a specific deadline. For short term loans, this due date is usually within a year or less from the date the loan was issued.
Short term loans are valuable options for small businesses and startups. These categories of business might not be eligible for a credit line from the bank. Small scale businesses in South Africa can access short term loan within the range of R100 to R4000. This range solely depends on the financial service provider.
It is also important to note that short term loans are not only suitable for businesses. Additionally, it is recommended for people who find themselves in financial difficulty.
Characteristics of Short term loans?
A short term loan’s name derives from its strict payback terms. They are meant to be quickly paid off. In most cases, they must be paid off within the span of six months to a year, 18 months at most. Any loan with a longer payback policy is considered a medium term or a long term loan.
- In most cases, the debt must be settled within six months or one year.
- They typically range from R500 – R250 000.
- You can receive the money within 24 hours of submitting your application.
- In comparison to long term loans, they carry slightly higher rates.
- However, they can be cheaper to repay than longer term credits .
Long term loans can last from over a year to 25 years. Some short term loans do not specify a payment schedule or a specific payback date. Though this is a rare feature, they allow the borrower to pay back the loan at their own pace.
What kind of short term loan should you choose?
Short term loans are usually on offer in the following forms:
1 Payday loans
You can easily get payday loans in South Africa. Banks and lenders can offer them without much difficulty. Between paydays, payday loans are usually taken to cover emergencies.
This kind of credit has a very high interest rate, and typically should be paid back in one instalment once your salary appears in your bank account.
2. Merchant cash advances
In order to receive merchant cash advances, a business must offer their card terminal to a lender who in turn gains access to the business’ card terminal for payment processing. The process is simple and straightforward: A business receives money from a lender.
With a credit card payment, the lender deducts a small amount each time the company gets money from the customer.
3. Short term online loans
A loan can be obtained by simply visiting the website of an accredited lender and completing an application form. All of the application and processing is carried out online.
Upon approval for credit, you will get the money transferred instantly into your bank account. Repayment usually takes place automatically through automatic withdrawals.
4. Invoice Financing
In this type of financing, businesses can borrow against unpaid invoices (accounts receivables) while they wait for customers to pay them. The amount typically represents a percentage of the invoice amount.
Following payment of the invoice by the client, the lender takes the amount due by the client, including interest and other fees.
5. Lines of credit
It is possible to view lines of credit as credit cards for businesses. The business can access funds from the line of credit, depending on the credit limit.
A business who uses a line of credit must then repay it plus interest at a later date. Loan amount determines the number of monthly repayments as well.
Requirements for obtaining a Short term loan in South Africa
Just like every other form of loan, there are a few requirements that qualify you for a short term loan. Though these requirements might vary depending on the financial service provider. the following requirements are obtainable with a great percentage of South African credit providers;
- Valid South African ID
- Proof of income
- Schedule of monthly household income and expenditure
- Proof of address (A bill in your name which quotes your address)
- Offer to purchase
- Bank statement
Some lenders consider your credit score when analyzing your loan application.
Steps to receiving a short term loan
Before applying for a short term loan, here’s a step by step procedure you can follow to ensure a smooth loaning process.
- Determine the amount you wish to borrow and which you can afford to pay back.
- Compare short-term loan options and choose a lender that suits your needs.
- You should agree with your lender on the following things:
- the interest rate;
- the full amount you have to pay back;
- the period you are expected to pay back the amount; and
- the dates on which the instalments will be paid.
- After you submit your application, the lender has time to review it. During this time, they may also review your cash flow history and other financial information.
- You will quickly receive the funds in your bank account if you qualify for the loan.
- In addition to covering your immediate financial needs, you begin paying back the short-term loan till it is repaid in full.
Advantages of Short term Loans
There are many advantages to taking out a short term loan. Some of these advantages includes;
- Shorter time for incurring interest
Due to the fact that short term loans need to be paid off within a year, there’s limited time for interest to form up. The amount of interest paid for short term loans is significantly lower than that of a long term loan.
- Quick funding time
Unlike long term loans, short term loans are less risky because of the shorter maturity date. It’s usually easier for the borrower to repay short term loans over a short period of time. Thus, the time it takes for a lender overseeing the process is shorter. As such, the borrower can access the loan amount more quickly.
- Easier to acquire
Short term loans are financial lifelines of smaller businesses and individuals who suffer from less than stellar credit scores. The requirements for this loan are usually easier to meet. This is because the loan amounts are relatively small.
Disadvantages of short term loans
The major disadvantage of short term loans is the fact that they only provide small loan amounts. As soon as the loans are paid off, they usually involve a small amount, so the borrower won’t have to worry about large monthly payments.
How can I get a small loan fast?
Short term loans online with same day payout have become popular to businesses and individuals with pressing cash demand. Also time is money and no sane person would want to waste it. Knowing this, it is not entirely wise to wait for the bank to process your credit or advance request. The ever available credit service South Africa enjoys through different finance bodies is something to be grateful for.
However, to enjoy these advantages, it is important to know which service providers are available. The following is a list of 5 credit providers that can help you sort your financial emergencies immediately they occur;
1. Wonga loans
Wonga is one of the most prominent financial service providers in South Africa. They provide flexible credits with favourable limits. With wonga loans, you can get up to R4000 as a new customer. They allow existing customers up to R8000. They offer a favourable payback plan that spans within 6 months.
In a situation where you are in need of small loans online, Cobol’s got you. With varieties of options, they offer short term loans up to R3000 which you can access anytime. Loan repayments is also within 6 months. Application process is as simple as visiting their official site and filling the application form.
3. Dube cash
Dube cash offers instant access to credit at your convenience. Application approval occurs almost immediately or within 60 minutes. The short-term loan amount is also sent into your account almost immediately after approval. Pretty sweet, right? Well, it is important to note that, repayment amount is usually deducted when you receive your next salary.
4. Hoopla Loans
Hoopla loans is an online brokerage company that offers short term loans and other forms of credit service to its borrowers. As soon as you complete Hoopla’s online application form, hoopla sends it out to credible and reputable lenders. Lenders will consider your application and treat it as top priority knowing it is coming from Hoopla loan. Irrespective of the fact that you might have a bad credit score, Hoopla loan can solve your financial challenges.
5. Easy cash
This financial service provider offers great deals for your short term loan application. They aim at serving and guaranteeing South Africans a smooth loaning experience.
Having briefly looked at what the topic entails, it is not offered over just yet. Moving on, it is very important to carry out an in depth research and the financial provider of your choice. This will help you weigh your options and make efficient loaning decisions.