How to check what to look out for when taking out a personal loan

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If you are a South African and you are thinking about applying for a loan, you will find you have many options as long as you can satisfy some basic requirements. What are these requirements? Well, they do vary depending on the establishment you are approaching, but in the main, you will need to show:

  • Your ID card
  • Proof of address (no older than three months)
  • Proof of your income

Some loan companies may insist on you having a bank account and will want to see three or six statements covering three to six months.

Personal loans are a product, and just like most products available today, competition among providers is fierce. While it is good from a consumer point of view to have plenty of options to choose, it can make selecting the right product somewhat confusing.

Protecting the consumer

Don’t forget that when competition is strong, advertising plays an important role in attracting potential customers. However, there are certain rules and regulations that have been stipulated through the National Credit Act.

This is a document that was designed to support the welfare (economic and social) of all South Africans. It is aimed at ensuring a loan market that is accessible, clear, competitive, effective, fair, responsible and sustainable. Its job is to protect the consumer.

Bona-fide businesses that offer loans and who work with the National Credit Act framework will be registered with the NCR (National Credit Regulator).

Types of personal loans

You will find a wide range of loan deals on offer, and you need to be vigilant in comparing what is available in order to get the best deal for you. You need to know what to look for.

The types of personal loans on offer include:

  • Short term personal loans
  • Long-term personal loans
  • Consolidation loans
  • Student loans
  • Secured loans
  • Unsecured loans

The shortest type of loan is frequently called a pay-day loan, and this is usually repaid within a number of days, typically no longer than 30 days. Other types of personal loan vary from short term to long term, and be repaid over a period of between 12 and 72 months. There are some shorter-term loans available such as those repaid within six months.

Term Loans and Revolving Loans

You may be offered term or revolving loans such as those provided by Standard Bank. Basically, a term loan is the one that most people are familiar with, and this is borrowing over a defined and fixed repayment term. A revolving loan is one whereby once you have repaid say 15% of the loan (an example being Standard Bank) you have the option to borrow more.

Applying for loans online

The internet has made applying for loans much easier. Many businesses like The Old Mutual Life Assurance Company offer online applications. It makes the application process much faster, and it also provides the opportunity of checking several sources for the best deals.

Taking out a personal loan is something that millions of South Africans do every year. It is a good way of managing your personal finances if you wish to buy something specific without having to pay out one large lump sum, or if you have a need to consolidate e number of debts into one cheaper repayment.

The cardinal rule is to ensure that you can afford to make any repayments on time. This is what responsible borrowing is all about.