What is a personal loan?
A personal loan is a finance tool that may generally be used for various purposes such as paying for school fees, funding home renovations or paying for car repairs.
A borrower applies for a personal loan from a lending institution. If the borrower is approved for a personal loan, they are granted a certain amount of money, which they are required to repay the loan to the lending institution within a certain period of time with added interest, as the cost of borrowing.
Ideal for individuals who want instant access to money, which can be used for larger purchases, at lower interest rates compared to credit cards, personal loans may be secured or unsecured.
To qualify for secured loans, applicants must put an asset up as a form of collateral. Interest rates are lower.
Unsecured loans require no collateral and generally have higher interest rates.
What do you need to get a personal loan in South Africa?
In South Africa, to apply for a personal loan, you generally need to be at least 18 years old with a valid South African ID.
You may need to provide a few documents, such as your latest bank statement and your most recent payslip.
During the application process, you must be able to prove that you are employed and that you will be able to afford to make repayments. You will be screened for credit risk and will undergo an affordability assessment.
If you are approved for a personal loan in South Africa, the amount may be transferred directly into your bank account or into a card with ATM facilities.
Personal loan amounts in South Africa may range from as little as R500 to as much as R250 000. You may have fixed monthly repayments, with repayment periods ranging from 1, 6, 12, 24 36 48 to 60 months.
Credit life insurance is usually compulsory, making sure that your debt is repaid in the unfortunate event of your death, retrenchment, critical illness or permanent disability.