No matter who you’re borrowing from, it’s safe to say that the biggest risk involved in taking a loan is that you won’t be able to make repayments on time, or may default on payment completely. If you’re considering your options for a personal loan, make sure you know the risks involved before you proceed.
Unsecured versus secured loans
If you need a personal loan, you have two main types of options – a secured loan or an unsecured loan.
A secured loan is “secured” against a valuable asset. For instance, this might be property, or any other asset of value that can be held as collateral. The asset is held by the creditor until the loan, including interest and applicable fees, has been repaid.
An unsecured loan, such as a bank loan, requires no collateral against the loan, making it riskier for the lender. For this reason, unsecured loans often have lower borrowing limits than secured loans.
The risks involved with a bank loan
A bank loan is a good option if you want a loan that has a long repayment plan as well as a fixed interest rate. However, you should be aware of the potentially serious consequences of not repaying a bank loan within the loan period.
Some bank loans have flexible repayment terms, so if you fail to make repayment on time you may be able to extend the loan agreement. However, if the loan period is fixed, you may need to enlist the help of a debt counsellor to restructure your debt and renegotiate the terms of your loan with your creditor.
If you default on payment completely, this will reflect negatively on your credit record – possibly limiting your access to credit in the future.
The bank may also choose to take legal action against you to recover the value of the loan. If the bank gets a judgement against you in court, the Sheriff of the Court may seize your assets, to the value of the amount that you owe the bank.
Notoriously, the value of people’s assets are grossly underestimated during this process.
The risks involved with an asset-based loan
As an asset-based loan is a loan secured on condition that the borrower provides the creditor with an asset as collateral. The value of the loan is determined by the value of the asset.
Typically, defaulting on this type of loan will not reflect on your credit rating or result in legal action. Instead, the lender will sell the asset that you provided as surety in order to recover their losses.
So losing the asset that you offered as collateral is the only real risk involved with an asset-based loan.
Apply for an asset-based loan with Lamna
If you’re in need of a personal loan and have a valuable asset – such as a vehicle in your name, a luxury watch or a valuable antique – consider a short-term, asset-based loan from Lamna.
With this type of loan, you won’t be putting your other possessions, your credit rating or your reputation at risk.
We treat every loan in the strictest confidence. Our interest rates comply with the National Credit Act. We don’t perform credit checks and in most cases, you can access the funds you need on the same day you apply.
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.