
No one wants to be in debt, especially a large amount of long-term debt that drains your finances, but not all debt is a bad idea.
If you need to borrow money, it’s essential to know when it makes financial sense to get a loan in South Africa – and when it doesn’t.
In this article, we cover:
- the basic principle for any loan
- questions for potential loan providers
- when you should consider a loan
- when a loan doesn’t make sense
- short-term asset-based loans.
A basic principle for any type of loan
A loan can be a useful way to cover a lack of funds, but it’s not a good idea if you can’t pay the loan back in accordance with the loan agreement.
Before taking out a loan, consider whether your financial situation will have improved in the coming months, so you don’t end up with debt you’re unable to repay.
Bad debt can make you financially unstable. It may negatively affect your credit rating, making it hard to finance in the future.
Questions to ask a loan provider
Before you decide which loan provider to use, ask these questions to ensure you know what to expect.
- What’s the total cost of the loan, including fees and interest?
- What are the terms of the loan?
- How long does the loan application take?
- When is the first payment due?
- What documents are required when applying?
- Are there any early-settlement penalties?
- Does the loan affect your credit rating?
- How long have you been in business?
- Is the loan company registered with the NCR?
When getting a loan makes financial sense
Here are a few circumstances when a loan makes financial sense.
Bridging a short-term cash shortage
Anything from an emergency dentist visit to unexpected car repairs can mess up your budget when you least expect it.
This type of short-term cash shortage is usually resolved after the next payday or two. In the meantime, a short-term loan can help you cover these unexpected bills.
Helping fund personal or business growth
An opportunity to study or take a workshop that would advance your career is a good reason to get a loan.
Investing in your business through expansion or buying new equipment can also result in business growth that makes a loan worth it in the long run.
Taking advantage of a financial opportunity
Financial opportunities for investment or partnerships seldom arrive when you have the funds for them. If a time-sensitive (and sound) investment opportunity presents itself, a short-term loan may be the perfect way to ensure you don’t miss it.
When a loan doesn’t make financial sense
If available funds are exhausted, and existing lines of credit are maxed out, going deeper into debt isn’t wise. This is especially true if you have no idea when you can pay a loan back.
If you find yourself in this situation, prioritise cutting costs, reducing stress and drawing on support from others.
Short-term loans against personal items of value
At LoanAgainst, we offer short-term loans that use a personal item of value as collateral. Items we accept include cars, motorbikes, boats, luxury watches, jewellery, gold, fine art and antiques.
We take temporary possession of the item for the duration of the loan and return it to you once the debt has been repaid.
Because the loan is secured by the item, these types of loans don’t have any effect on your credit score. This makes them low risk when it comes to your future credit health.
Get a loan in South Africa from LoanAgainst
We’re a trusted lender with branches in Cape Town, Durban, Johannesburg and Gqeberha (Port Elizabeth).
We offer fast, transparent and discreet loans with competitive interest rates and no hidden fees or early settlement penalties.
If you have decided it makes financial sense to get a loan in South Africa and you own an item of value to use as collateral, contact us or simply apply online for a loan.