Job losses, the ZAR currency crunch and above-inflation increases in the cost of living are putting the squeeze on home finances. Ordinary South Africans are finding it more and more difficult to come out on their monthly salaries.
Taking a personal loan or accessing your mortgage bond may seem like an immediate solution. But before you rush out to the nearest lender, be sure to ask these eight crucial questions.
What is your reason for wanting a loan?
Before you take a loan, consider whether it’s necessary. If it’s for something you want rather than need, or so you can spoil others, it’s probably best to hold off. Instead be patient – save what you can each month and buy goods or services once you can afford them, in cash.
Some valid reasons for taking a loan? Helping finance your business or seeing it through a cash-flow crisis, paying for your studies, temporarily making ends meet or covering unforeseen costs like medical expenses.
What is the cost of the loan?
You’ll have to pay interest on the loan amount. You may also have to cover administrative fees and, if you don’t comply strictly with the terms of the loan agreement, various penalty fees.
Make sure you know exactly what the terms of a loan are before you sign on the dotted line. Ask the lender to calculate the loan amount plus interest so that you know exactly how much you have to pay back in total.
Can I afford the loan?
Banks conduct strict affordability tests before they lend money, but other lenders don’t do this. That means it’s up to you to make sure you’ll be able to repay a loan.
One advantage of an asset-based loan with Lamna is that unlike a bank loan, it doesn’t involve putting your other assets, or your family’s home and belongings, on the line. Instead, it’s only the asset you provide as collateral that’s at risk if you can’t repay your loan.
What is the term of the loan?
If you’re offered different time periods in which to pay back the money, avoid taking the longest term.
This may seem more attractive because your monthly repayments will be lower and you’ll have more time in which to pay the loan off. However, you’ll also be charged more interest. Overall, you’ll pay a lot more for exactly the same loan amount.
Is the lender legitimate?
Only borrow money from banks or micro lenders registered with the Financial Services Board (FSB) or the Micro Finance Regulatory Council (MRFC).
This helps ensure you’ll be charged interest rates in line with what is deemed acceptable by the National Credit Regulator, and if you fall behind on your payments, you won’t be physically threatened or intimidated.
At Lamna, we are fully compliant with the National Credit Act.
Is early settlement allowed?
Find out if the lender allows early settlement of the loan. If you come into some money, it’s a good idea to settle the debt as soon as possible.
Many micro lenders calculate the amount you owe based on the term of the loan, and will even impose penalties if you pay back the money sooner than specified in the loan agreement.
What collateral is required?
To cover the risk associated with lending you money, banks and micro lenders may request you provide collateral against the loan. This may be in the form of a life insurance policy, unit trusts or shares or tangible assets such as jewellery, fine art or a vehicle.
If you do borrow money against an asset, be aware that you stand to lose the asset if you fail to repay the loan within the agreed term.
What happens if I die?
If you pass away before you’ve paid back the loan, the good news is that the lender cannot legally claim it back from your spouse, children or extended family members.
However, the lender can lodge a claim against your estate. If there are not sufficient funds in the estate, any assets will be sold to cover the cost of the debt.
At Lamna, we offer short-term, asset-based loans. Our process is confidential and transparent, and we’re fully compliant with the National Credit Act. For more information about securing a loan, contact us on 086 111 2866.
Client borrows R10,000 for 90 days.
Total Cost of Loan
Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.