Getting a Personal Loan - The Definitive Guide
A personal loan is money borrowed from a credit provider such as banks and online lenders.
You can use the money for any reason. Maybe you want to purchase something important but don't have the cash for it right now.
A personal loan can add value in your life if planned and used wisely as an investment.
Let's dive right in...
What is a Personal loan?
A personal loan is any amount you can borrow from a bank or financial institution for personal use.
Usually a fixed amount paid in fixed monthly installments. Repayment terms range between 12 to 72 months.
Personal loans are unsecured credit solutions. The bank or lender grant you a loan based on your ability to pay it back.
You don't need any security to secure a personal loan.
Credit providers look at several factors to determine if you qualify for the loan. They look at your credit score, income, affordability, expenses and so on.
If you have good credit score, you're guaranteed the lowest interest rate on your loan application.
It gets interesting.
If you can't afford a unsecured personal loan, the lender might offer you secured loan.
With secured loans, you will be required to secure your loan with collateral such as vehicle or house.
Should you default or fail to pay back the loan under agreed terms, your asset will be sold to recover the loan money.
Why take out Personal loans?
Depending on your current situation.
The benefit of taking out the loan is that it comes with fixed interests. This helps you plan your monthly budget and keep track of installments.
And your monthly installments will be affordable and easy to manage.
Personal loans could help you help build credit history. You might take a small cash loan just to have a credit record in your name.
People don't really need loans, but life happens, and we run out of funds sometimes. Consumers are advised to only borrow money when it’s absolutely necessary.
Use the money to advance yourself - invest in yourself. You can spend the money to acquire a new set of skills that'll advance your career.
How to apply for personal loan
Applying for a personal loan has become simpler nowadays than ever before.
We have so many online lenders and loan brokers in South Africa. They help connect loan applications with credit providers.
You can apply for the loan online, at the branch or via telephone.
And of course, it'll be easier for you to get a loan with your bank. They already have a good understanding about your income and spending.
BETTER - the bank might offer you the best solution for your current situation.
Choose a personal loan that you can afford to repay with more flexibility. Shop around and compare loans from different lenders and calculate your monthly expenses. Some lenders can do this on your behalf but it's best if you determine your own affordability.
You will be required to meet certain criteria to qualify for the loan. The bank doesn't want to give money to a minor - right?
You might be required to bring the following:
- Identification book or Smart ID
- Recent Pay slips
- Recent banking statements
- Proof of residential address
How to spend your personal loan
Consumers are always advised to borrow money only when it's necessary. Being responsible automatically leads to spending money wisely, to advance your life.
Banks usually don't a cap on how you can spend the money you've borrowed, so you can use the loan money however you feel fit. Perhaps, you wanted to buy a good quality second-hand car or go on holiday - DO IT.
One most wise way to spend a personal loan is to consolidate all your debt.
Make personal loans good credit.
How to improve your chances of getting a loan
To qualify for good credit, lenders want to know if you could afford the loan.
The easiest way to improving your chances of getting a loan is to keep your finances in order. Keep up with your monthly installments and debit orders.
This will increase your credit score and help you secure a good credit for your most important expense.
It's against the law for banks to over indebt consumers, so you'll always get a loan you can afford.
You need to avoid making multiple loan applications to various lenders, it always affects your rating negatively.
Watch out for loan scams
The internet has made our lives easy in the world.
We can apply for personal loans at the comfort of our homes. We can get instant decisions and money in our bank accounts within minutes.
But, within the pool of trusted lenders online, there are also criminals.
Loan scams come in many forms. Some claim to approve your loan with bad credit.
You must avoid lenders that claim to approve loans without checking your credit profile.
Those are reckless and will steal your hard-earned money.
You must never pay anyone to get a loan - it wouldn't make sense.