If you’re human and you also use money to attain resources like the rest of us, the thought of taking out a loan has probably crossed your mind. Before continuing with your loan application, take into account the following key points:
Your Credit Record
A good credit record can mean the difference between getting a loan you apply for or not. Lenders (Institutions like Absa, African Bank, Woolworths, FNB, etc.) place a large emphasis on a borrower’s credit score and credit record. If you maintain a good record you will have no problem in accessing a loan. Your credit 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 rates and this results in large monthly instalments. As a South African you are entitled to one free credit check per annum at any credit bureau. If you’re doubting your credit record, and you’d like to improve it first, read here on 3 powerful steps to improving your credit score.
The Fees and Cost Structures
Don’t get caught with a loan with astronomical fees and costs. Some lenders try to make more money from their initiation costs and service fees than they make from the interest charged. That’s an unnerving thought, as interest can compound quite a bit. Fortunately, the fees charged by lenders are regulated by the National Credit Regulator (NCR). They set strict guidelines on the fees the lenders are allowed to charge and this puts a stop to them from overcharging you. Always look for a lender’s NCR certification before accepting a loan, so head on over here to make sure!
The Annualized Percentage Rate is a great tool to use when comparing different loan providers. It is the interest rate that the lender or bank will charge you and is worked out per year – 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. Remember to look for a truly transparent lender when applying for a loan and make sure you fully understand the finer details, allowing you to make the best informed financial decision. If you’d like more in-depth information on these points, feel free to visit the Fincheck Top Tips page.