The reality is that life can be expensive; the cost of basic necessities, like food, housing, utilities, transportation, clothing and school-related expenses, keep rising. Unfortunately for a large number of people in South Africa, the rising costs of living mean having to live paycheck to paycheck. Some South Africans may not even earn enough to cover their monthly expenses.
So what happens in the event of an unforeseen financial emergency?
Nedbank
Finance27
Finchoice
Capfin
Letsatsi Finance
Uloans
Absa
First National Bank
Boodle
Wonga
Mpowa Finance
Lime
FASTA
Finding your way out of a financial pinch can be difficult; it's easy to fall into the traps of unnecessary debt, exorbitant service fees, and shady lenders. Luckily, BudgetGist is here to guide you through the process of deciding to take out a short term loan. After all, we pride ourselves on being South Africa’s information hub for all things related to finance and money.
Your car breaking down unexpectedly, a short stint in the hospital, your beloved pet falling ill, emergency home repairs... The list of financial emergencies is never-ending and it's impossible to know what life will throw at you next. Without a comfortable emergency savings fund, you can find yourself in a very difficult situation. This is where taking out a short term loan can help!
As the name suggests, short term loans have a shorter loan period than other loans like home, car, or personal loans. The loan period can be anywhere from a few months to a few years, it depends on your capital loan amount, credit score and lender.
With short term loans, you are also offered a smaller loan amount, typically between R1 000 and R15 000. The major drawback of short term loans is the high interest rates compared to personal loans and other types of loans.
It's important to note that short term loans are unsecured. This means that you should not be asked to provide surety or collateral in exchange for the loan.
A short term loan is a tailored solution to your problem. The loan amount and terms are generally quite flexible compared to a personal loan. Additionally, the loan approval and payout times are faster than traditional or personal loans.
Because the loan term is far shorter than personal loans, you don't have the long commitment of a personal loan. If you're smart about it, your debt can be paid off in no time and this will reflect well on your credit score.
Short term loans should be a quick cash injection to keep you afloat for the weeks ahead.
There are many lending institutions and individuals in South Africa offering short term loans. However, all of these lenders may not be authorised financial services and you may find yourself paying exorbitant fees and interest rates, having to fork out personal property as collateral, or you may be offered larger loan amounts and a monthly instalment you cannot afford.
First off, all authorised financial services should be registered with the National Credit Regulator (NCR). This is an easy and foolproof way to determine if a lender is fraudulent.
You should also thoroughly read through your contract and take note of the terms and conditions. Be wary of lenders who ask you for collateral or to pay an upfront fee or deposit.
Most importantly, stay aware from lenders who reach out to you with loan offers that you cannot pass up. If it seems too good to be true, it likely is a scam! Reputable and authorised financial services will not approach you offering a loan nor will they advertise online or on social media without disclosing their full identity and credentials.
The best way to sniff out a shady lender is to thoroughly research the company as well as the representatives you are speaking to. Unless you are physically going to the bank to apply for a loan, there is always the possibility of your lender using false credentials to gain your trust.
Fortunately, there are a number of reputable short term loan lenders in South Africa. Most major banks offer short term loans. These include banks like Absa Bank and Nedbank. You can always check with your respective bank if they offer short term loans that you may qualify for. There are alternative financial institutions like Wonga which specialise in short term loans.
Your chosen lender should be registered with the National Credit Regulator and should be able to prove their identity. Reputable short term loan lenders should be able to provide you with a physical address of their place of business.
Additionally, they should run credit checks and affordability tests before offering you a loan. This means they will calculate how much you can afford to borrow based on your income, expenses and credit score. You should not be approved for a loan amount that you cannot afford to repay.
Today many loan applications are done online. However, this doesn't mean that all loan applications are the same. For example, Nedbank requires that all applicants be over the age of 18, be employed with a minimum salary of R3 500, and be an existing customer. On the other hand, Absa requires you to be to over the age of 18, be employed with a minimum salary of R1500, and provide proof of residence, your latest 3 months' bank statements and proof of an active bank account.
The process to apply for a short term loan should be quick and hassle-free if you take the time to read over the application process requirements beforehand. If you are unsure if you meet the requirements, don't hesitate to contact the lender and ask them to clarify things for you.
Short term loans can be a great way to handle unforeseen financial setbacks. The reduced loan period and flexible loan amount can offer a personalised solution to your financial situation. Additionally, short term loans can positively affect your credit score without having to commit to paying premiums over a number of years.
While the capital loan amounts are not as large as personal loans, ranging from R1 000 to R15 000, the interest rate on a short term loan is much higher than a personal loan. It's important to take this into account when calculating if you will be able to repay the loan.
Be wary of fraudulent lenders who are not registered with the National Credit Regulator. With short term loans more than any other type of loan, there are plenty of scammers and you will need to do your research before beginning the application process.
When selecting a lender and/or short term loan programme take note of the interest rate you are offered, how much you have to repay each month, how long the long term is, and whether there are any additional service fees. Don't be afraid to ask potential lenders lots of questions and try to get a few quotes before settling on a short term loan that suits your needs.
Financial emergencies can cause you to make hasty decisions that might come back to haunt you. We're here to help you look before you leap! BudgetGist is South Africa’s information hub for all things related to finance and money.
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