important info about personal loans
Make sure you have all the facts
terms vary across lenders
You decided how long you need to repay your loan and the options range 1 month to 72 months (6 years).
Fees & Other Costs
Each personal loan provider will charge its own fees or lending costs. Make sure to check with each offer.
The interest rate charged on a personal loan will depend on the loan provider you chose.
What is a Personal Loan
A personal loan is a type of loan issued by financial organisations to help you fulfill your present financial needs. You can use a personal loan to rebuild your kitchen, go solar, or buy a family vacation, for example.
A personal loan can also be used to pay for medical expenditures, debt consolidation, or any other personal need. Personal loans must be repaid over a specific length of time and with regular monthly repayments. The majority of personal loans are unsecured, which means you won’t have to put up any assets or a deposit as security.
Personal loans are unsecured, which means you don’t have to give the lender any security or collateral. Personal loan amounts vary and AA Money sources personal loans ranging from R500 to R350,000.
Borrowers (you) typically have between one and seven years to repay the money, with interest rates ranging from 3% to 36%. The Annual Percentage Rate, or APR, is the best metric for comparing loans. It considers not just the interest rates, but also any additional fees.
Personal Loans: Benefits and Drawbacks
Personal loans, like any consumer financing products, offer advantages and disadvantages. It is in your best interest to conduct research before applying for a personal loan so that you can determine if a personal loans is your best option for borrowing the funds you need.
Benefits of personal loans
- Spreads the cost of a large purchase across time
- Can assist in the handling of your personal finances
- Unsecured loans are not tied to assets
- Ideal if you have previously struggled to save
Drawbacks of personal loans
- It’s possible that repaying your loan may take a long time
- To qualify for a good personal loan, you must have a good credit score
- Interest rates may be greater than for other types of credit
- Failing to repay your personal loan could negatively affect your credit score
What do these terms mean? personal loans terminology
The following is a glossary of common loan terminology that will assist you in better understanding the various loan options available to you, allowing you to make a more informed decision.
Interest rate: This usually means the annual interest rate, which is one of the most important things to think about when getting an instalment loan.
Origination fee: This fee covers the costs for the lender to process a new loan application. It is given as a percentage of the total loan amount. It’s also called an administration fee, an underwriting fee, or a processing fee. Origination fees can be found in many kinds of loans, such as personal loans.
Loan amount: The amount of the loan being requested, which is the main part of the total payment. Keep in mind that the actual loan amount may differ because the lender may take some of it to pay for the extra fees that come with the loan.
Annual Percentage Rate (APR): This shows how much it will cost you to borrow money each year as a percentage of how much you want to borrow.
Loaned Fees: These are the fees that the lender adds to the loan. Banks usually charge interest on them because they are tied to the amount of the loan. Because of this, loaned costs have a bigger impact on the APR.
Prepaid fees are fees that you have to pay in advance (called a “prepaid finance charge” or a “upfront fee”) or when you get the loan. Even though there is no interest on these fees, they still raise the APR.
Effective Annual Percentage Rate (EAPR): This rate is more accurate than the simple APR because it takes into account the different ways interest is calculated.
Periodic payment: The amount of money you have to pay each time, based on how often you have to pay, until the whole loan is paid off.
Loan term: The amount of time you have to pay back the loan and any fees that come with it (interest and any other additional fees).
Payment frequency: This refers to how often the loan is due to be paid back. The standard frequency of a personal loan would be monthly.