With the ever-increasing prices and unstable inflation rate in the country, many South Africans find themselves in an economically difficult position. If you ever find yourself in need of cash, a Personal loan could be a great option to finance your emergencies.
A personal loan is designed to provide simple financial solutions, which are designed to be easy, quick, and simple. This article aims at helping you discover how personal loans work, how to get them, and how they work.
Ultimately, this guide will give you the confidence to choose a loan that will meet your needs and cover any financial gaps you might have. Let’s dive in.
What is a Personal Loan?
Taking a personal loan means getting money from somewhere to cover your personal expenses. These expenses might include home renovations, medical expenses, wedding expenses and many more. Some of the basic characteristics includes;
- You can borrow between R2000 and R300,000
- The loan is repayable over a time frame ranging from one month to seven years.
- The funds can be used for general purposes. People use these products to renovate their homes or purchase cars, while others use them to consolidate debt or cover wedding expenses. It’s all up to you.
Terms Relating To Personal Loans.
In order to ensure a smooth loaning experience, it is important to be familiar with the following terms.
1. The principal amount
This is the total that you initially borrowed, excluding any interest payments or other charges. For example, an R10,000 loan becomes an R3,000 loan by paying off the following amount: R7,000.
2. Interest rate and Loan term
This is the time you have to pay off the loan. Loan terms typically start from 1 month and go up to 84 months. The interest is the fee that lenders charge customers when they borrow money. The interest rate is given by the lender and expressed as a percent.
3. Monthly Repayment
Your monthly repayment is a payment you make to the lender each month in order to pay back your loan. Completing your repayments reduces your principal balance and covers interest and other charges associated with the loan.
4. APR
The annual percentage rate, commonly referred to as the comparison rate, not only incorporates interest but also encompasses all additional charges related to debt, presented as a percentage rate.
How do Personal loans actually work in South Africa?
The process of taking out a loan of any kind can be tricky sometimes. Applying for a personal loan typically requires the following steps, especially if you don’t follow these steps.
1. Comparing loans.
There are different loans. Each type offers various benefits and disadvantages and different terms and conditions. The first step involves comparing your options so you can choose the best personal loan for you.
2. Checking the requirements to see if you qualify.
Once you have found the product that fits perfectly into your budget and situation, move to the next step. Make sure that you have all the information and documents needed for the application process. You should also meet certain requirements such as those concerning age and monthly income.
3. Approaching the lender and making an application.
After you qualify, you can then apply with the appropriate lender. This can be done online, over the phone, or at a branch.
4. Getting approved and agreeing to the terms and conditions..
A credit contract is a legal agreement between you and the lender. It describes information such as the amount of money you’re receiving, the interest rate for the loan, and how much time you have to pay it back. Once the agreement is signed, the lender transfers the money to your bank account, ready for your use.
5. Paying back.
Debt is typically repaid in monthly payments. The amount of each payment depends on the total amount of the loan. In addition to the duration and monthly repayment, other terms and conditions may be involved, such as penalty fees for early repayment.
Types Of Personal Loans.
Licensed lenders offer a range of personal loans, so your choice will depend on several factors including what you want to use the money for, how much you earn each month, and your credit history.
Generally, these are the types available:
1. Secured Loans.
A secured loan allows you to borrow money when you use a valuable asset, such as your car or home, to guarantee the loan. By using collateral, you can borrow more money and secure lower interest rates and fees. However, you risk losing the asset if the loan is not paid back as agreed.
2. Debt Consolidation Loans.
You can use this type of loan to pay off your existing accounts. This leaves you with only one easy-to-manage account that might save you from interest and other charges.
3. Lines of credit.
These come with a maximum credit limit. How much you pay back depends on how much you have used. Lines of credit are also for general purpose use.
4. Unsecured Loans.
These loans require no security or guarantee, and they are for general purposes.
5. Student Loan.
These help you pay for your education and other related expenses.
6. Overdraft.
If your bank balance is low, you can still withdraw a limited amount of money from your account.
Personal Loan Interest Rates.
As you agree to the terms of the contract, you also agree to the interest rate that the lender has for your personal loan. The maximum interest rate for a personal loan in South Africa is 27.50%.
In general, interest rates vary from lender to lender, but they can be classified as either fixed or variable. In general, your lender will begin charging you interest after the loan has been drawn down into your bank account.
How Do You Qualify For A Personal Loan?
The general requirements for qualifying for a personal loan in South Africa include:
- Minimum age of 18 years;
- You should be employed or self-employed;
- Prospective applicants must be earning a regular, monthly salary or income; and
- Having South African citizenship or a South African residence permit.
Required Documents For Applying for A Personal Loan.
The following documents must be available to increase your chances of loan approval.
- A valid South African ID;
- 3 months’ payslips or bank statements;
- Proof of residence, e.g. water bill; and
- For a secured loan, you need documents that show proof of ownership for the asset you’re using to guarantee the credit.
How to Apply For A Personal Loan In South Africa.
Before applying, it is helpful to re-read your options one more time. Major points to consider before applying includes;
- How much do you want to borrow?
- Which monthly repayments are affordable for you?
- Whether you are choosing a secured or an unsecured loan depends on whether you already have an asset or plan to use the credit to purchase an asset. If not, then an unsecured loan may be a better option.
- Is a fixed-rate loan right for you? If you want to budget accurately, a fixed-rate loan is good because your repayments stay the same throughout the loan. On the other hand, a variable interest rate may offer a better interest rate if the interest rate drops.
After having considered the above point, it is important to note that the application process can be either online or offline.
Offline Application.
Offline loan application is the oldest form of loan application method. This application process involves actually visiting the physical branch of the loan facility to apply in person. Prospective applicants are expected to bring all necessary documents to the branch for assessments.
Online Application.
Some credit providers require their applicants to submit their applications online via the internet. The application process entails accessing the official website of the loan platform and going through the application process. The loan provider’s database stores all required documents in the application process.
Top 5 Personal Loan Providers In South Africa.
A personal loan application involves performing a little research and comparing available options. These are some of the individuals and companies that are thought to provide reliable services in the area of personal loans;
1. Nedbank Loans
Nedbank is a top financial institution in South Africa. The organization works very hard to ensure top-quality services for its members. They Offer wholesale and retail banking services, insurance, asset management, and wealth management. With Nedbank loans, prospective customers get;
- Personal loans range from R2 000 to R300 000.
- Flexible repayment periods from 6 up to 72 months.
- Monthly repayments are debited from your bank account.
- Easy online loan application process.
2. Direct Axis Personal loans.
Direct-axis is a proudly South African business. Serving for over the last 25 years of direct-to-consumer insurance brokerage expansion. It is one of the largest and most successful direct marketers in the financial services sector. Serving not only in South Africa but on the continent. Prospective applicants get to enjoy;
- A personal loan from R1000 up to R250 000.
- Interest from as low as 15%.
- Fast, paperless application process.
- Within seconds, the cash will be deposited in your account.
- Flexible repayment options; choose from 12 to 60 months.
- Fixed monthly repayments.
3. Capitec Loans.
Listed on the JSE, Capitec Bank is one of Africa’s largest diversified financial services providers. committing a great percentage of their resources to find local solutions to uniquely local challenges. With Capitec loans, prospective customers get;
- Get up to R250 000 over 1 84 months.
- Prospective applicants can choose between the amount they want and the monthly installment that suits their pocket. They can also select the option that gives them the lowest interest rate.
- Credit is approved in minutes, and the money is available immediately.
- Make fixed monthly payments.
4. RCS Loans.
RSC Group is super passionate about enhancing people’s lifestyles. They are working towards achieving this by offering a range of responsible consumer finance solutions that are innovative, accessible, and desirable.
Prospective applicants get to enjoy;
- A cash loan from R2 000 up to R250 000.
- Interest from as low as 15%.
- Fast, paperless application process.
- The decision is made in seconds. Cash in your account within 24 hours.
- Flexible repayment options; choose from 12 to 60 months.
- Customer Protection Insurance.
5. African Bank.
African Bank Limited is a South African retailer offering a variety of financial products and services. South African Reserve Bank controls the bank and it operates mainly in South Africa.
Prospective applicants get to enjoy;
- Loans up to R250,000.
- Terms between 7 months and 72 months.
- Super easy application.
- Flexible terms and loan conditions.
Other personal loan providers include;
Note; Explore your funding options and take advantage of the various private lending opportunities we’ve curated to help you achieve your education goals as a prospective applicant.
Conclusion
Loans for personal use are a good way to ease personal financial problems. Whether it’s medical, home improvement, or general maintenance. Technology has made every process so convenient for our convenience. You can apply for Personal funds from the comfort of your home. That’s pretty cool, isn’t it?