If you search for ‘personal loan’ right now, Google will show you options from R5 000 to R200 000, that you can get with a “quick five-minute application,” for “cash in 24 hours.” And if you’re blacklisted? They won’t even do a credit check.
Getting a personal loan is easy, and unlike loans that are earmarked for specific purposes, i.e. a bond to finance a home, motor finance to buy a car, or a student loan to pay for your studies while you get the qualifications you need to pay it back; a personal loan can be used for absolutely anything – as long as it’s a fairly responsible spend. And legal.
But easy come, as they say, and easy go…
Debt Rescue, a debt management firm introduced by the National Credit Act (NCA) to help over-indebted consumers, reported that, last year this time, South African consumer debt was at R1,63 trillion, with consumers owing as much as 75 percent of their monthly pay to creditors. And with the rising costs of living, that other 25 percent has a long way to go to the next pay day.
The Association for Savings and Investments of South Africa (ASISA), has three tips for surviving tough financial times: become aware of what you’re spending daily; draw up a budget; and rid yourself of debt.
With those clear instructions, is there ever a good reason for a personal loan? Personal loans can get you out of a fix, if you’re already in one, but cash is ultimately king. ASISA warns consumers that the biggest financial mistake you can make, especially during this time of interest rate hikes, is failing to acknowledge that you might be at risk of becoming over-indebted. With that in mind, we looked at three reasons to apply for a personal loan:
- Consolidate debt
If you’ve already bought into the buy-now-pay-later lifestyle and maxed a credit card or two, taking a personal loan to consolidate your debt repayments into one monthly repayment may be a good idea. Secure personal loan interest rates (where you put up collateral, i.e. your car) are generally lower than credit cards and retail accounts, so you’ll save on interest, and win in life.
Secure personal loan interest rates (where you put up collateral, i.e. your car) are generally lower than credit cards and retail accounts, so you’ll save on interest, and win in life.
- Refinancing a student loan
As most college and university graduates might
confess, ‘adulting’ is hard… and expensive. Especially if you’ve tried to catch up to your parents’ standard of living in your first year out of school with a financed, brand new everything – forgetting of course, that toilet paper doesn’t pay for it itself.
If you’re already overstretched, consider refinancing a student loan over a longer term with a more favourable interest rate on a personal loan. You may lose out on tax deductible benefits, but at least you won’t have to reach for the newspaper.
- Your wedding budget
Ideally, this is something you should save for, preferably from the time you start thinking about it in primary school, but love happens unexpectedly.
And how long can a wedding really wait? So draw up a budget for a responsible personal loan ahead of time for the expenses your savings (and your parents) won’t cover, instead of maxing your credit cards. Again.
A word of caution to the husbands-to-be: personal loans are not meant for engagement rings. Side note, my husband didn’t know this. Second side note: He financed my ring with his loan to consolidate his other debt. Let’s just say we were in debt for the first two years of marriage. Save up. She loves you for you, anyway. That said, I’m keeping the ring.
That said, I’m keeping the ring.
Getting married or need to consolidate your debt? Click here to let us help!