Taking out a personal loan can be a tempting way to help pay off a big expense, allowing you to cover an amount realistic for your budget each month over an agreed period of time. But unlike home loans, personal loans are unsecured; in other words, they are not secured against any asset (for example, your house), so interest rates are generally higher than on a secured loan. So, if you’re not savvy, you could end up paying hefty fees and charges, borrowing more than you can afford, and even getting charged extra if you try to settle it early. Luckily COSMO is here to help with a guide to everything you need to know about personal loans.
1 SHOP AROUND
Make your own bank your first port of call when shopping around for a loan. After all, they know your financial history and how you manage money, so it’s likely they’ll offer you the most attractive interest rate (provided you’ve kept to the agreed terms for any existing financial product you have with them).
That’s not to say you shouldn’t check with other banks and financial institutions to see whether they can offer you a better deal. In addition to comparing interest rates, look for other charges, such as annual fees. Bheki Mpofu of Absa says you should consider the following before taking out a loan: how quickly you want to pay it off, how much of your loan you can afford to repay every month, and whether you need credit insurance. ‘This can cove