Taking an unsecured loan for a small business can be considered a real test, because banks almost always reject such applications. If your attempts to get unsecured personal loans in banks do not bring results, do not write off your hands and get depressed – there is a way out! Plenty of microfinance organizations provide unsecured loans South Africa in the shortest possible time, without requiring a pile of documents.
Unsecured loans allow you to take care of personal expenses that we can suddenly avoid. Lenders in South Africa offer a variety of loan options to cover these costs.
What are Unsecured Personal Loans?
Well, you probably know the term “personal loan”. A personal loan is simply money borrowed from a financial institution, such as a bank or MFI. You can use the money for anything and usually pay for a wedding or for home repairs. Unsecured personal loans mean that by taking a personal loan, you do not need to use a valuable asset as collateral. In other words, you can apply and get a loan without using the property (it could be your house, car, etc.) to secure the loan.
How do Unsecured Personal Loans Work?
As mentioned above, it is not necessary to use property or assets as collateral for an unsecured position. This means that if you do not repay the loan, you will not lose the property. However, unsecured loans tend to have high interest rates.
At higher interest rates, lenders are protected from the inability to repay the loan. Finally, unsecured loans can also limit the loan amount.
Unsecured Loans in South Africa
Here is an overview of unsecured loans in South Africa:
- Minimum amount you can take: R1000
- Maximum loan amount: R350,000.
- Loan term: You usually have from 1 to 84 months (7 years) to repay the loan.
- Interest Rate: The maximum interest rate of loans for individuals in South Africa is 27.5% per annum.
Apart from unsecured personal loans South Africa, other types of unsecured loans are lines of credit, payday loans, and student loans.
What is the Best Time to Apply for an Unsecured Loan?
The best thing about unsecured loans is that you can use the money for almost anything, and you don’t need to mortgage a house or car to get a loan. However, it is advisable not to take a loan if you really do not need the money.
Remember that borrowed money is not free money. You have to return it with interest. So, sometimes you can apply for a loan. The following examples are reasonable motifs for applying for an unsecured loan:
- An emergency. Emergencies come in a variety of shapes and sizes. Regardless of the emergency, you should borrow money whenever you need it to cover family or medical expenses.
- If you want to buy the most important thing. This may be something you need to use regularly to make life easier. Examples are laptops, textbooks, electronic devices. You can even spend money on car repairs after a breakdown.
- Pay for what you plan. It can be a holiday or a wedding. They are often expensive, but they are worth it, and you may need financial help to pay for them.
- Invest in what pays off. You can use unsecured business loans in South Africa to invest in something that will bring you more money.
- Unsecured debt consolidation loans, poor credit. Unsecured personal loans are a useful tool for debt consolidation. Use the unsecured debt consolidation loans to repay existing debt, leaving a more manageable loan.
Comparison of Secured and Unsecured Loans
The main differences between the two types of loans are explained by the following points:
- Collateral loans, such as home and car loans, require the use of your car or home to obtain a loan. On the other hand, unsecured loans do not require such collateral.
- Without collateral, there is no risk of losing property. But if you can’t pay the deposit, you can take advantage of the house or car.
- Interest rates on unsecured loans are generally higher than on mortgage rates.
- Unsecured loans can limit the loan amount. They also impose stricter requirements than secured loans. For example, it is very difficult to get unsecured personal loans bad credit, or unsecured loans for blacklisted clients.
Pros and Cons of Unsecured Personal Loans
If you want to borrow wisely, you should also consider the pros of the loan you want to get. Typically, an unsecured personal loan offers the following benefits:
- No collateral is required. You do not risk losing your precious fortune.
- Money from unsecured loans can be used for any purpose.
- Applying for an unsecured personal loan with all the prerequisites is a simple process. Usually, the application process can be completed online by filling out the form.
However, unsecured loans also have the following disadvantages:
- Your interest rates are higher.
- You cannot borrow a large amount.
- You may need a short-term loan repayment.
- It is very difficult to get unsecured personal loans for bad credit.
How to Choose the Best Unsecured Loan for You
When looking for a secured personal loan that meets your needs, you should pay attention to the following:
- Interest rate. Although unsecured loans are relatively high, you can still find a loan with a lower interest rate. Would you also like to have a specific interest rate or a variable interest rate?
- The amount of money you can borrow. Pay attention to the following: decide on the debt and how much you can repay. Then, find the lender that suits your needs.
- Other costs associated with the loan. A loan with a low annual percentage rate (APR) will help reduce the overall cost. APR comprises interest rate and additional costs such as the service and entrance fee.
- Extra features. This involves studying a large amount of additional information about the loan. For example, you may need a loan coverage to protect you in the event of death, unemployment, or disability. Sometimes, if you plan to repay the loan as soon as possible, this may be charged with some fee.
How to Apply for an Unsecured Loan
Before applying, you should make sure that you meet the basic requirements:
- Identity card of South Africa;
- minimum monthly income (depending on the lender);
- profit and loss statement (usually a bank account or receipts for the last 3 months);
- good credit history;
- the minimum age is 18 years.
By choosing a trusted and licensed financial service provider, you can go to their website. To help you with online unsecured loan applications, we have several options and a “Register on the Website” button for each lender online. By visiting the website, you can fill out an online application.
A popular question is: are there no credit check unsecured loans? Yes, there are unsecured loans for bad credit, but interest rates are often very high.