personal loans in South Africa

Private Personal Loans in South Africa (And Which Might Be Best For You)

November 28, 2018

As credit balloons in South Africa, more than half of all the current loans taken out are eligible for debt intervention. If you’ve worked hard to maintain good credit, you might be able to get a good rate. However, if you’re totally new to personal loans in South Africa, you might need to learn more about how they work before you take one out.

Here is everything you need to know about private personal loans to help you choose the right one for you.

Common Types of Loans

There are a few standard types of loans you can get in South Africa. The most common are microloans and unsecured loans. These loans are accessible to most South Africans and can help to get over small financial issues or major financial investments.

A microloan is intended as a short-term loan. These credit transactions aren’t meant to be for casually spending beyond your means but for getting through financial rough patches. A typical microloan will be under the R8,000 mark.

Payback can usually happen over the course of several months with an interest rate that can climb pretty high.

Getting a personal, or an unsecured loan, will give you more money over a longer period of time. Depending on the state of your credit, you’ll be able to take out up to R200,000 to be paid back over the course of a few years. Payment periods can range up to seven years.

If you want a larger loan, you should seek out getting an unsecured loan. These loans can help you get your first home, buy a new car, or pay off large medical bills. With the variety of payment schemes, you should be able to find one that fits your budget.

Understanding Unsecured Loans

If you’re seeking out an unsecured loan, you need to know what the terms are all about.

An unsecured loan varies from secured loans where the amount of money you loan is backed up by property. With a secured loan, you’ll have to already own a house, car, or piece of property that could be used to pay back your loan if you fail to pay it off.

If you don’t have assets to back up your loan, the terms of your loan will take on a different shape. When lending institution knows that there’s something that can be sold if you don’t pay your loan, they’ll be more willing to take a risk. To take out a big unsecured loan, you have to have a strong credit history.

In the absence of assets or surety, your credit will hang in the balance. You’ll likely pay higher interest on the unsecured loan you take out than a secured one. However, if you have a good credit history, you have a little more power over the terms of your agreement.

The unsecured loan industry is booming. In the last 10 years, it’s grown to a huge market, totalling over R80 billion. With many households looking for credit to improve their quality of life, it’s no surprise the industry is booming.

Get to Know Interest

Whether or not you’re interested in interest, interest is interested in you. When you take out an unsecured loan, you can expect to pay some interest. However, depending on how good your credit is and the kind of financial institution that you choose, you could be paying a range of rates.

Credit is assessed on a case by case basis. How much you make will be compared to how much debt you’re in and your other financial responsibilities. Lenders will come away with a number that represents how much you could pay back, how long it will take, and how much they could make from interest.

Low-risk customers will get a rate closer to 9%. Higher risk lenders will end up with much higher rates. If you have poor credit and are paying off a credit card, you could be paying rates as high as 20%.

Fixed rate loans are available, but you might find that those rates are higher than ones you could get. However, if a variable rate loan leaps up, you could end up paying way more than you bargained for.

If you take out a microloan, you’ll be subject to interest as well. Those rates are much higher because the duration is shorter. You could be paying 5% per month or 30% over six months, depending on how long it takes you to pay it off. When you take out a microloan, you’re always better off paying it as soon as possible.

Other Types of Charges

When you get a loan, there could be all kinds of other charges attached to your own. If this is your first time taking out a loan from them, you could get charged an initiation fee just to get things started. This amount could be found on both unsecured loans and short-term loans.

There are some standard rates, most often R150 for each loan that you take out then 10% on every Rand over R1,000. However, your initiation fee will never total more than R1,000.

Watch for service fees and other line items that your¬†lender might charge you. Upon request, they should be able to go through everything they’re going to be charging you for.

Any reputable credit provider will be able to walk you through the process of getting credit insurance. This can help you with liability in case you hit any lapses in payment.

Personal Loans in South Africa Can Help You

When you’re trying to expand your current lifestyle or expand your wealth, personal loans in South Africa can help. Personal loans can be a way to get more property that you can build or develop to turn into passive income. They can also help you to pay off any¬†money you owe.

To learn more about short-term loans, check out our latest guide.