Don’t know what exactly a personal loan is? Or are you unsure where to start looking? Are you unhappy with the previous loan you took, and you need to find a new lender? Don’t worry, we’ve got you covered. In this article we’ll discuss what a personal loan is, what types of personal loans there are and how to get the right one for you. We’ll be explaining the pros and cons of different personal loans, what you need to consider before getting one.
What is a Personal Loan?
Personal loans are general-purpose loans. Typical reasons for getting a personal loan can be location changes, house renovations, weddings etc.
There are two types of personal loans – secured and not secured ones. Secured personal loans are bigger loans that require a collateral. Collateral is an asset or a piece of property that secures the loan in case you cannot repay it. The advantages of a secured loan are that you can get a bigger loan amount and lower interest rates.
Unsecured personal loans are loans for those small amounts you fall short by at the end of the month, or for any emergency that might befall you. They are easier to obtain even if your credit history isn’t perfect. Actually, an unsecured loan can help you improve your credit profile if you repay it in time. The downside on unsecured private loans is that interest rates are higher, due to the lack of collateral. Lack of collateral means the financial institution giving you the credit has no guarantee they will get their money back.
What is an unsecured Personal Loan?
The concept around unsecured personal loans is quite simple. You take a loan and use the money for whatever you needed it in first place. You pay the loan back with interest, in a period of 1-7 years. An unsecured personal loan requires no security, deposits or guaranty of any sort. In some cases, there is also no need for a good Credit Score.
What are the advantages?
The greatest advantages that unsecured personal loan have over other types of loans include the following:
Super-fast and easy to obtain
No security deposit or guarantor required
Fast approval and payout
No lengthy processes and delays
Easy online application
Even faster transaction, a loan can be approved in as much as 15 minutes
You don’t need to take a day off your work and go anywhere
The payment options are simpler and more convenient
What are its disadvantages?
Higher interest rates, due to the lack of collateral
Higher fees
We can easily see that the Pros easily outnumber the Cons of unsecured personal loans, provided that one is cautious and pays back in due time. It is a good choice for someone with not enough savings when an unexpected situation occurs.
Is this the right loan for you?
A personal loan is one of the easiest loans to get. It requires absolutely no security, no guarantor, no lien or anything like that. All you need is a bank account and a proof of income, for example, a pay stub. The online loan services are so easy and fast; you can apply for a loan even in your lunch break!
However, we still recommend that you take your time and really think about taking a loan and make sure to compare your options. Use the time and find a loan that will match the amount you need, the time you will need to repay it and remember to compare the different lenders available. On moneezy.co.za you can easily compare loan offers from different loan providers.
How much does a personal loan cost?
The interest rates for unsecured personal loans in South Africa are capped by the National Credit Regulator. The cost of a loan in a combination of an initiation fee every transaction (max. R150 + 10% of any loan exceeding R1000), a monthly interest (max. 5% of loan amount) and a service fee (max. R50). Hence, the cost of a loan can be maximum R200 + 15% of loan amount.
The actual costs of personal loans can vary depending on the amount of loan and the lender. If you default, the bank can require an additional default fee.
For example, consider that Person A gets a loan for R2000 with an agreed total cost of R500, two weeks before their payday, so the agreed loan period is two weeks. But they fail to pay back in time due to a busy schedule or a typical lack of seriousness or due to an unprecedented financial situation. The lender charges an additional monthly interest and service fee on R150 to roll it over by another couple weeks, hence Person A ends up having to pay R650 in addition to the amount loaned. If they keep rolling it over, they might end up having to pay more, in fact several hundred rands in worst case scenario. So only take payday loans in the amounts that you know you can pay back in time.
Also consider another example, say Person B takes the same loan for the same amount and same period. As the pay check arrives, Person B pays it in full and gets rid of the loan. In this scenario, there the person only had to pay a total of R2500. And the loan ended up helping them in the hour of trial. It can even benefit by improving their Credit Score in such a scenario if the lender reports that in time payment to the officials.
Payment Methods
The payments for online payday loans can be made in multiple methods. You can use an advance check or the payment can be made via bank transactions, or directly by your debit card as well. The particular method may depend on the lender and most online lenders do offer multiple methods as well.
What is the next step?
Before applying for an online personal loan, all you need to do is calculate how much money you need. Then head to our comparison page and find the right offer for you.
Simply fill out the application form on top of this page and we will present a list of pre-approved offers for you.
