Business and personal tax liabilities often come at the worst time. If funds are short, a personal loan is an option to cover these potentially hefty payments.
But is it a good idea? We look at what to consider before getting a loan to pay taxes.
What to do before considering a loan if you can’t pay your taxes
Before you apply for a loan, check if there are other options available. Start by contacting SARS. Try to negotiate a payment plan with monthly tax payments based on your current situation.
This can make paying a large amount more manageable. However, you must stick to the payments set out by SARS. This option is less likely to be available to you if you owe money to SARS from previous tax assessments.
When it may make sense to get a loan to pay taxes
If a repayment option is not available or you’d prefer to pay one lump sum and be fully tax compliant, then a loan makes sense.
If the amount you owe is large, then settling that debt immediately is probably best, so you can avoid any potential penalties.
Even if the repayment option is available, a personal loan may have a more reasonable repayment plan, depending on the financial institution.
Businesses, in particular, may find it better to be fully compliant with SARS to avoid any complications when it comes to staff taxes or VAT.
Pros and cons of using a loan to pay SARS
It helps to understand the pros and cons of taking out a personal loan to pay your taxes. The pros and cons vary depending on the type of loan, the bank in question and your financial situation. These are some of the key considerations.
Pros of using a personal loan to pay SARS:
- quickly settle your debt with SARS and be tax compliant
- pay off your taxes over a longer period
- costs less than using a credit card
- predictable repayment plan that you can budget for.
Cons of using a personal loan to pay SARS:
- paying interest
- taking on more debt
- may affect your credit score.
Benefits of an asset-based loan from lamna
Instead of getting a personal loan to pay taxes, you can opt for an asset-based loan. These loans are secured by an asset such as a car or luxury watch. They don’t require credit checks or affect your credit rating.
An asset-based loan doesn’t affect your ownership of the asset. The asset is simply stored as collateral for the duration of the loan. You get it back once the loan is repaid.
We accept a large range of assets as collateral for a loan including cars, luxury watches, diamonds, gold, artworks, antiques, yachts and even NFTs.
An asset-based loan from lamna guarantees:
- NCR-compliant interest rates
- no hidden fees or early settlement penalties
- no sharing of your details with third parties
- quick and transparent application process
- funds transferred to your account within 24 hours.
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.