A loan is a transaction between a Borrower (a person or company receiving the money) and a Lender (a person or company giving the money). The principal amount is the actual amount of money given to the borrower. Interest is then added onto the principal amount and is a percentage charged per annum (per year). The interest rates vary across the different categories (Personal loan, Pay Day loan, and Student loan) and across the different banks or private financial providers. Fincheck organises all this information for you, read more on Fincheck here.

The longer the loan term is (how long it takes to repay the loan), the less your monthly instalments will be, but, the greater the end amount is that you will repay. This is because interest gets added onto your outstanding amount over a longer period of time. The longer you keep the loan, the more interest you will pay, resulting in a greater end amount. If you choose to pay off the loan quickly, your monthly instalments will be greater, but the end amount you pay for the loan might be less because the interest charged has not built up so much. There will always be interest added to any loan amount you choose, so please understand that above explanation talks about lesser and greater amounts of interest. It doesn't mean paying back a total lesser amount than you borrowed if you pay it back quickly. The amount will still be added to your initial loan amount, so you will always pay more back when you take out a loan amount - whether you pay back in a short amount of time (usually less total interest) or longer amount of time (usually greater total interest).

Did you know?

• Most people will need to borrow money at some point in their lives.

• It is important to understand the different loan variations available and what rates each provider charges during your loan term.

• If the wrong provider is chosen, you could end up paying huge amounts more than necessary. This is due to interest rates, initiation fees, service fees and other costs.

• If you are unable to pay back your loan on time or the full amount payable, it will affect your credit score and ability to borrow money in the future.

• It is important to shop around and find out which lender will provide you with the cheapest interest rates and fees. Fincheck has an automatic system that works through all the relevant lender information to provide you with your best loan options. We do the research for you.

Secured loan

A secured loan requires the borrower to provide an asset to stand as collateral for the loan. The asset is in most cases property or a vehicle. If the borrower defaults on his/her payments - they don't pay on the agreed upon time -  the lender is entitled to take the asset that was put as collateral and sell it to redeem the value of the loan.

Benefits of a secured loan

• Allows the borrower to access a loan at cheaper interest rates and over a more favourable term. This is because the risk of lending to you decreases.
• For the lender, it allows the lender to lend you money with minimal financial risk. If there is a default in payment they sell your asset that stands as collateral to pay off the outstanding balance.

Unsecured Loan

When lenders talk about an unsecured loan, they refer to a loan that needs no asset to stand as collateral. This means that you are able to receive a loan without owning an asset. In the event of a default on your monthly instalment, the lender cannot take your house or vehicle to retrieve the outstanding debt amount. The recourse they can act upon is going through legal procedures in order to regain the outstanding money. These lenders base their decision primarily on your credit score and income. Due to the fact that unsecured loans carry more risk for the lender, their lending terms are less favourable than secured loans.

Benefits of an unsecured loan

• You do not need an asset as equity against the amount you are lending. Which is the case for many lower income earners.
• Due to you not needing an asset to stand against your loan amount, not owning a property or vehicle will not stand against you when applying for a loan.

Closing Thoughts

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​When we refer to a bad credit rating it means that you may have defaulted (missed payments) on your previous loans or accounts, had a court judgement against you, or had cheques bounce or been declared bankrupt.

Having a bad credit record or having no credit record has one vital thing in common – they both make it tricky to access a loan. When you have no credit record, it means you have no credit history to date. You have not taken out a loan, have no existing accounts or registered a credit card under your name. For many this might sound great and they will give you a pat on the back, but the reality is that it will keep you from being able to make important financial transactions, like buying your first home or car. Unless you have the cash lying around!

Many people think that having a credit history or buying things on credit is a bad thing. The reality is that we almost cannot escape it in the current state of the economy. The only bad thing is when people treat their credit and loan applications irresponsibly. This results in bad credit scores.

Lenders will often hold the above mentioned two records against you when applying for a loan. It will limit your options and you will generally be charged with higher interest rates and have access to less funds. For a first time borrower this will only be the case for your first loan. If you have the discipline to pay back all your instalments on time, your credit score will increase and you will gain a more favorable rate on your next loan.

Fincheck supports a healthy mindset towards having a credit score and we want to help you make decisions that build a great credit score with great tools like our loan comparison calculators!

If you have a bad credit score you can improve it by paying all your instalments according to their agreed upon amounts and time periods.

Simply said, this means paying all your accounts (Makro, Woolworths, Pep stores, etc.) on time and paying the right amounts.

An easy key strategy is to spread out your loan applications, with enough time between them. Each time you apply for a loan you leave a 'footprint' showing the next lender that you have previously applied for a loan. If you apply for numerous loans in a short period of time this will show as a suspicious act. Using Fincheck, you can compare numerous financial options by using our loan comparison calculator without leaving a 'footprint'. This allows you to research your options without your credit score being marked.

If you have a bad credit record, it is probable that you will be charged a higher interest rate. However if you can pay off your next loan on time and according to the agreed upon amounts– you will be well on your way to an improved credit score in the near future!

The banks simply want to see that you can and will pay back the money you owe to the people or business you owe it to.

The interest rate charged by the person or business that lends the money is determined mostly by the risk they take on. The less risk they take, the lower the interest will be that they charge.

The interest rate a lender charges the borrower is proportional to the risk they take on. Interest rates are added onto the amount of money you borrow. This rate is added on every month. When repaying your loan you will need to cover both the actual loan amount and the interest charged.

The South African NCR has placed a ceiling on lenders. This prevents them from charging more than a certain amount of interest per year depending on what loan a person applies for. For example:

Personal loan: 32%

Pay Day loan: 60%

The interest charged is added onto your outstanding amount. It is calculated per annum but payable on every instalment (monthly).

Fixed Interest rate

A fixed interest rate is when the lender and borrower decide to charge a particular fixed interest rate on the loan regardless of the movements of external interest rates. This will help the borrower budget their cash flow. It can either work for you, or against you, for example if external forces might have resulted in your payment being lower. Once you and the lender have decided on the interest rate that will be charged, it will not change throughout the duration of your loan.

Compounded Interest

Compounded interest is when interest is charged on top of interest. Let’s use a simple example. If you borrow R100 and the interest charged after Month 1 amounts to R10. The interest charged and payable for Month 2 will be worked from R110 (100+10=110) and not R100 like it was for the first month. This compounding of the interest rate can result in a person being charged considerably more than what they would like. The borrower needs to ensure they minimise the amount of compounded interest charged. This is usually done through paying on agreed upon time periods and amounts payable.

Your Credit Record

Having a good credit record could mean the difference between getting a loan a person applies for or not. Lenders (Institutions like Absa, African Bank, Woolworths, FNB, etc.) place large emphasis on the borrower’s credit score and credit record. If you maintain a good record you will have no problem in accessing a loan.

What influence does your credit score have?

• It could determine whether you obtain a loan or not.
• It influences the interest rates the lender charges you. If you apply for a loan but your credit score is bad, it means you are a greater risk to the lender. This will result in the lender charging you higher interest on the loan.

You have the option to check your credit score through us. You are entitled to one free credit check per annum if you go through a credit bureau. However, if you check your credit score through Fincheck, we will pay for the credit score check.

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Did you know?

Lenders usually make more money from their initiation costs and service fees than they make from the interest charged.

That's a scary thought, since interest can compound quite a bit!

Fortunately, Fincheck takes all of these fees and costs into consideration when calculating your loans and repayments. We account for all the unusual costs before giving you the option to choose the best suited lender for your needs.

The fees charged by lenders are regulated by the National Credit Regulator (NCR) legislation. The NCR sets maximums on the fees the lenders are allowed to charge. This prevents them from overcharging you.

Here is a list on some of the fees charged, so you know what you are paying for your loan

• Initiation Fees is the amount charged to initiate your loan.
• Service and Administrative fees is the amount charged per month for administrative purposes.
• Prepayment charge is charged when you pay off your loan earlier than your decided repayment date.
• A late payment penalty is charged when you make a late monthly instalment.
• Insurance is not always needed but for some lenders it is required. It is a fee that you pay which insures the lenders against default payments and loans.

The Annualized Percentage Rate (APR) is a great tool to use when comparing different loan providers.

The APR is the interest rate that the lender or bank is going to charge you. This interest rate is worked out per year – but payable at the end of each month.

Generally speaking, the shorter your loan period, the higher the APR or interest rate you will be charged. In South Africa a cap has been set for the maximum interest rate a lender is allowed to charge the borrower. This ensures that lenders do not exploit borrowers when lending money.

Fincheck allows transparency with this information and shows you what each lender will charge – allowing you to make that informed financial decision when applying for an online loan.

​The bank you choose will become the safe house for your money. It is worth while comparing and selecting the bank that offers you the best returns - both in service and finance.

Box's to tick:

1. Customer Service: Does the bank you are about to choose offer you good customer service. Are they going to help you when you cannot make a payment via internet banking. Do they offer honest advice when it comes to setting up or expanding your banking network? If the answer to these questions is 'Yes' - your life will be a lot easier when working your own hard earned money.
2. Interest Rate: You need to compare the interest rates each bank offers. The 8th wonder of the world is compound interest... As you build your capital wealth - the interest you earn on your money will make a big difference to your capital growth. Different interest rates are given for different bank accounts. Pointing back to point 1 - you need the trust the advice from your bank and know that they are presenting you with the best options for your needs.
3. Know what you are wanting to achieve: Know whether you are wanting to use the account as a transaction account, savings account, call account, business account, etc. This will dictate which bank account suits you best.
   

Customer service is a growing concern for many banks. They are placing more and more emphasis on serving their customers better, this is because they realise that the power lies with you. When researching which bank will give you the best service, it is advisable to:

1. Speak to friends and family. Direct referrals are the most powerful and most reliable source of information. Your friends and family will tell you if they are happy with their banks service.
2. Research using the internet. There is a wealth of information on the internet. Do be careful to not take everything you see and read as true. Individuals post their thoughts and comments on the internet and social media, read what they have to say about the banks you are interested in.
3. Get in touch with Fincheck. Our website has heaps of information on each and every bank in South Africa. Read our Product Guide
   

For this you need to answer the following questions:

1. Is it easy to get your money whenever you need it?
2. Is it easy to pay people whenever you want to?
3. Can you find an ATM?
4. Do you get unknown charges at the end of each month?

After answering those questions you will know whether or not to change banks. You have worked for your money, you should be able to ​access it, pay people with it and not get unfairly charged in order to do so. Compare your bank with the other banks - right here! Use Fincheck - That is what we do for you.

​Internet banking is a convenience feature. Once you have mastered the SUPER easy task of paying someone via internet banking - you will understand its luxury. Plus - with most banks it comes as a free service.

Don't feel rushed or under pressure to select a bank or investment. Take your time - research each possible option and compare them with other banks. This way you are sure to find which provider will offer you the biggest bang for your buck

The earlier you begin to invest part of your salary for retirement, the richer you will retire. Wealth is built through the 8th wonder of the world - Compound Interest. If you invest 10% of your monthly salary into an account for retirement and do this for 30 years. Both accumulated capital contribution and compound interest will work together to increase your final retirement amount.

This is how to retire comfortably.

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South Africa is rated as being one of the most indebted countries in the world.

Becoming a saver means forming a habit. You need to get into the habit of putting at least 10% of your salary into some sort of savings at the BEGINNING of each month. It is crucial that you do this at the beginning of the month so that you don not spend that money. If your strategy is to save the money that you don't spend at the end of each month​ - you will end up saving on average a lot less than 10% of your salary.

Savings will allow you to access money and not need to take out a loan. You can use your savings for new home furniture, holidays, weddings, fix your car. It acts as a safe for when you need to access money quickly.

Fincheck is the financial shopping center for South Africa. ​We do not charge you anything to use the service.

To make using a comparisons website easy and quick to use, you need to do the following:

• Know what you are looking for
• Find that category on the website. Fincheck compares the whole banking sector (loans, savings, personal banking, business banking, investments). You will find everything you need right here.
• Read the fees and interest rates charged for each product
• Understand the minimum requirements of each company. We have made this easy for you
• Then click apply on the product you want

There are no costs involved from Fincheck - so apply at as many companies as you want and search for your best options.​