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At some point, many South Africans will know what it's like to worry about whether or not they're going to make their financial commitments at the end of the month. In fact, to illustrate, Capitec Bank revealed their gross personal loan book value stood at R40.9 billion in 2016. Standard Bank and African Bank follow closely behind Capitec as the biggest personal loan providers in the country, according to Moneyweb.
Realistically, having money available to pay for unexpected costs isn't always possible. Cars break down, loved ones fall ill, and cell phone screens crack. With costs piling up, some turn to personal loans, of which there are two types: short-term and long-term loans.
Long-term personal loans allow you to borrow money from a financial institution with a relatively long period to repay the loan. These kinds of personal loans are most often used when you don't have access to money and need to pay for a large and unexpected expense, such as a medical emergency or major car repairs. The interest rate will depend on various factors such as the loan amount, the term, and the borrower's financial history, but it can be lower than that of a short-term loan.
Many financial service providers offer long-term personal loans. When you apply, the National Credit Advisor (NCA) will run a credit check on you to make sure you can afford to make your monthly repayments.
The creditor will ask you for your latest payslip, proof of address, a copy of your ID document, and your last three months' bank statements. If your loan is approved, the repayment period will be determined based on how much money you borrowed, how much you can afford to pay back monthly, and any other terms laid out by the financial institution.
It's important to only borrow money from reputable financial institutions that are bound by strict laws and regulations. Loan sharks offer financial services and solutions to desperate clients at extremely high interest rates, often well above legal limits and, in some cases, with random interest rate spikes and shortened repayment deadlines. Loan sharks are commonly known for using threats and even violence to collect debts owed to them. These criminal behaviours can't be regulated as they usually operate outside the bounds of the law.
If you've had an unexpected expense and are considering taking out a long-term personal loan, you can easily compare reputable loan providers online using our hippo.co.za personal loan comparison tool.
Sources: Moneyweb, Wikipedia
Prices quoted are correct at the time of publishing this article. The information in this article is provided for informational purposes only and should not be construed as financial, legal, or medical advice.