Our Beginner’s Guide to Taking Out Loans – What to KnowFeb 27, 2020
People have the opportunity to borrow personal loans – be it to finance a start-up business, alleviate financial hardships, or even just to support a large expense due to emergencies, needs, and more.
What are Personal Loans?
Also known as unsecured loans, these are loans that are primarily based on your credit score and income details. Many people use this as a go-to solution for financing needs as it doesn’t require you to use anything, such as your property or car, to act as security for this type of loan.
Keep an Eye Out for the Interest Rate of the Loan
Keep in mind that lenders charge varying interest rates as it changes according to the amount you want to borrow. Seeing as personal loans provide no security for the lender, the risk means that you should expect to deal with higher interest rates.
With that in mind, the interest rate is typically shown as an annual percentage rate (APR). It touches on the amount you’re due in addition to the money you borrowed, which means the lower the amount, the better it is for you. Of course, the interest rate will also be influenced by your credit score.
Ask Questions and Stay Up-to-Date with Your Credit Score
Having a full overview of your credit score plays a pivotal role when taking up a personal loan. For one, a low credit score can harm your chances of borrowing money. Even if you do manage to get an approval for a loan, the low credit score can have a direct, negative impact on the terms of the loan and the overall interest rate.
Taking on ways to improve your credit score before borrowing money can do wonders for you in the long run as it can ensure a seamless loan application process. Fortunately, boosting your credit score can be done by simply removing any incorrect details on your credit report. Of course, this includes taking due action by paying off small debts and ensuring repayments are given on time.
Either way, remember that applying for a personal loan will still affect your credit score, so be sure to evaluate your loan options before moving forward with the process.
Different Ways to Tackle the Repayment Method
The repayment method indicates the entire duration of time you need to repay the loan. A shorter repayment method means that you have to shell out monthly, while a longer timeframe allows you to pay with lesser amounts each month.
Of course, paying for less for a longer durations comes with its downsides as the interest rate builds up over time. However, it offers an agreeable option for borrowers with a tight budget.
What are the Benefits of Taking Out Personal Loans?
The primary benefit of borrowing money is that loans can be paid back in monthly instalments over a set course, though the timeline largely depends on your circumstances and consistency. When paid back correctly, taking out a personal loan can be highly beneficial in various instances. It can provide for the following:
- Consolidate debt
- Alternative to a payday loan
- Finance home remodelling
- Money for moving expenses
- Unplanned emergency expenses
- Make a large purchase
However, it’s in your best interest to do your homework as it can be a slippery slope to navigate. In between repayments and interest fees, you need to arm yourself with knowledge before moving forward in your financial endeavours.
If you’re looking to take out a personal loan in South Africa, Hoopla Loans is your best option. Get in touch with us today to see how we can help.