14 November 2016

Loan Star: Understanding Personal Lending and How to Make It Work for You

My Money Matters |

In our fast-paced society, many of us find that the cost of living is becoming hard to maintain. We struggle to keep our heads just above water and balance the cost of essential items and those little indulgences that keep us sane, so it’s no wonder that we often find that our larger expenses simply don’t fit within our budgets. So what do you do when you can’t afford to study, pay a deposit on your new spot or buy that new laptop that you so desperately need for work? Sometimes the only solution is to take out a loan, but before you do, it’s essential that you understand how unsecured lending works.

What is personal lending and when should I consider taking up a product?

Let’s look at a personal loan – this would be defined as an amount of money (R250 – R350 000, available through Absa) which you borrow in your personal capacity with the understanding that you will need to pay back the full amount, plus fees and interest. What you will pay back is based on the rate of interest over an agreed-upon period of time, or ‘term’.

Here’s an example:

Say you borrow R50 000 on a three-year loan term with a 16%interest rate, your monthly repayment amount would be R1 868.33. Paying your personal lending off monthly in small, manageable bits, assists you to pay back what you can afford monthly without being financially stressed.

This makes it easier and convenient for you to pay off a large loan amount. Bear in mind, a higher interest rate and/or shorter loan term would mean higher monthly repayments and vice-versa, so ensure that you know what interest rate and loan term you’re subject to, which are based on your risk profile and affordability at point of application

You should consider a personal lending if you need a large amount of money or require funds in a hurry and don’t have time to wait for your salary. Just always remain cognisant of the fact that you are still going to have to pay back fees and interest on top of the loan amount. Lenders are required by the NCA Act to ensure that a full affordability assessment is conducted at point of application so be honest about your monthly income and costs to ensure that you have sufficient funds to afford the loan you require.

What are the personal lending options that Absa offers?

Absa has a range of personal lending options to suit your specific credit needs, as well as the Absa Price Guarantee, guarantees you  the lowest competitive interest rate.. If you find a find a like-for-like competing loan offer with a lower interest rate that meets the qualifying criteria of the promotion, Absa will better it.

Instant loan

R250 – R5 000

35-day loan term

This is a quick and easy loan that you apply for directly at any Absa ATM or on Absa Online, 24 hours a day, 7 days a week. It’s a perfect ‘month-filler’ loan for when you need extra cash over the weekend and can’t wait for the bank to open on Monday. It’s also hassle-free, accessible at any Absa ATM nationwide or online.

Express loan

R1 500 – R8 000

6-month loan term

This loan is extremely useful for those unexpected emergency situations. A burst geyser that needs replacing, that school trip that you just can’t say no to or anything else that requires a fast, moderate cash sum. With a relatively short repayment term, you’ll also ensure that you don’t end up paying far more than you borrow and settle your debts much faster.

Personal lending

R3 000– R350 000

12 to 84-month loan term

This is essentially the all-purpose personal lending, for anything from moderate to large expenses, with a very flexible repayment term of between 12 and 84 months. It’s perfect for both planned and unexpected life events that require a sizable investment. So whether you’re planning on remodelling your kitchen or funding that emergency dental procedure, an Absa personal lending will give you the freedom to choose your repayment term, and with the Absa Price Guarantee, you’ll always be confident that you are receiving the lowest interest rate available.


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Revolving Credit Facility

R15 000 – R150 000

No set repayment term

This is a recurring loan to access funds whenever you need them, without having to reapply. Once you have paid off 15% of your Revolving Credit Facility, you can access the same amount you have paid off again without reapplying. The starting amount you can borrow is R15 000 and the maximum is limited only by how much you can afford to pay back. This is a great option if you need flexibility and continuous access to credit,

Some food for thought before applying for a personal lending product:

  1. Be honest with yourself: Fully understand and acknowledge your personal financial situation and live within your means.
  2. Be honest with your bank: Absa relies on accurate information about your current finances in order to give you the best advice.
  3. Don’t keep up with the Radebes: Never let other people’s success distract you from your personal life plan and goals.
  4. Know how everything adds up: Be aware of everything that has an impact on your income and expenditure.
  5. Plan ahead and budget carefully: This helps you to borrow responsibly and assists you in obtaining financing should an emergency situation arise.
  6. Understand the economy: Read up on regulations like the Consumer Protection Act and understand how it impacts you. Be aware of fuel price hikes and plan your budget accordingly.
  7. Pay on time: Pay everything on time, every time – even the small things. Your repayment history tells financial institution how risky it is to extend credit to you, which determines the interest rate you are offered – and if you are approved for credit,
  8. Don’t hesitate to negotiate: If you’re in a situation where you’re after a high-value, or even low-value item, discuss a discount with the seller and see if you can bag a bargain
  9. Every cent counts: Think about every R5 and R2 you have wasted on trivial things. What could you have done with that money if you hadn’t misused it? It all adds up!

Get rid of unnecessary expenses: Often we buy items and sign up for contracts that we don’t really need. Evaluate your monthly financial obligations and consider how you can save costs by reducing unnecessary recurring expenses.

So now that you now exactly how personal lending works and what your options are , you can apply online, visit an Absa branch or call 0860 100 372 to find out more and get assistance.

Be smart when borrowing and prosper!


Disclaimer: The advice contained on this blog is for general purposes only and does not take into account individual circumstances, objectives or financial needs. Accordingly, readers are advised to seek appropriate advice from licensed professionals prior to making any investment, or taking up a financial product or service.

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