As a country facing a lot of debt, we're doing our best to help South African consumers understand credit health, loans and other forms of finance. In this educational series, we're tackling the loan industry, whether it's cash loans, online loans, payday loans or blacklisted loans!
In our previous post, we covered the basics of a loan and specifically personal loans. In this post, we'll recap the basics of a loan and tell you a bit more about pay day loans!
Before we delve into the loan education, remember the brand new Fincheck Online Loan Application page which will help you easily and safely apply for a loan. It's a better way of making your financial decision!
Let's get started.
First things first, what is a loan?
The answer to this question is quite simple actually: a loan is a sum of money borrowed and scheduled for repayment over time plus some (or a lot of) interest.
To explain it technically, a loan is an agreement between a borrower (the creditor) and a lender (the debtor) for an amount of money. This amount of money will, in turn, be repaid by the debtor (this is you) to the creditor (your bank or loan provider) according to the agreed upon terms and conditions. It usually includes interest - unless you can find a gracious and unheard of loan provider!
Choosing the right loan, whether it's a personal loan, cash loan or blacklisted loan, may become a difficult task to the uninformed customer. However, with Fincheck at your service, an online loan calculator will bring into comparison all the necessary elements to meet your need for the perfect loan.
The basic elements of a loan, whether it's a personal loan, cash loan or blacklisted loan mostly remain the same. A loan consists of:
- A payback period;
- An interest rate;
- And scheduled repayments.
The payback period is the timeframe in which a loan's repayment will be scheduled.
The interest rate is the tempo at which the balance of a loan will accumulate as time passes.
Scheduled payments are the way in which repayment of your loan will take place (in either amount or frequency).
What is pay day loan?
Pay day loans are loans used to supply cash on demand with your next paycheck as payment. It is often referred to as a quick loan, instant loan or short-term loan.
The size of your salary plays a big role in determining the amount of the loan and the amount of the repayment and some credit providers may allow up to 45 days of repayment. The Pay Day loan is not designed to finance big expenses like the purchase of a house or a car. Therefore the repayment is scheduled over a short timeframe.
The NCR is on your side when it comes to Pay Day Loans. They have limited pay day loans to not have interest rates of more than 60% per annum. The interest rate may seem high when it’s compared to other types of loans and there is a good reason for this. Pay Day loans are high risks for credit providers since the success of the agreement rests on one payment only. Added to this is the fact that the loan is unsecured – no asset will cover the outstanding balance of the loan.
What type of life events could justify a pay day loan?
Although possible, controlling and predicting your financial stability month after month is not an easy task, there are times when we all need some extra cash to cover an unexpected cost. Perhaps you’ve paid all your accounts, saluted your debit orders, bought your necessities, and now you find yourself with a pressing need for cash flow. These are the typical needs associated with people taking out pay day loans.
Has your fridge, microwave, couch, bed or any other home gadget broken down? These can be big financial burdens on many South African's cash flow. If you do not have the money to pay for what you need, then a payday loan could assist you in taking care of your family home needs. However, we don’t recommend you take out a loan just to pay for luxury goods.
Not everyone has medical aid or health insurance. If you have an urgent need for finance to pay doctor, dentist or hospital costs, then a personal or payday loan could be your key. However, we recommend you look into applying for a health scheme in the near future as the interest on a loan could quickly add up to a health insurance instalment amount!
Cash flow assistance
If you have any other out-of-the-norm needs that absolutely can’t wait, and you are able to honour your commitment, the majority of lenders are willing to be of assistance in providing you with this type of short-term financial relief.
How can you get a pay day loan?
Fincheck always aims to help people make better financial decisions. We have spent a lot of time and effort in building an online loan allocation system to help you get a loan that works for you.
If you fill out our easy online loan application form here, you will get loan comparisons fit for your financial profile!
After you have clicked on your preferred loan provider, they will be in touch as soon as they have determined you meet their minimum requirements. If you don't meet their requirements, we will do our best to get you in touch with another trusted partner who could maybe match your loan application needs!
It's always a good idea to check your credit health if you don't qualify for a loan. To help you with this, we offer FREE credit scores which you can learn about here.
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To your better financial future!