Getting the best deal on your loan
Statistics from the National Credit Bureau’s second quarter Credit Bureau Monitor showed an increase in the number of credit active consumers. Avoiding debt is always the ideal but the reality is that most consumers are likely to take up debt at some point.
Whilst taking out a loan might be the answer to a tough financial crisis or just to cover large expenses, the long term responsibility thereof should not be taken lightly.
“If a loan is not managed well, it could have a negative impact on your credit record and consequently your future credit applications. For this reason, it is important to sh
op around and make sure that you are comfortable with all the details of your chosen loan,” says Eunice Sibiya, Head of FNB Consumer Education.
Sibiya suggests the following guidelines to ensure that you get the best deal on your loan.
Reputable loan providers
Never look to an unregistered provider for a loan no matter how attractive the initial offer might seem as they are not governed by the National Credit Advisor (NCA) and they are more likely to charge higher interest rates and illegal fees.
“Your first and best choice when taking out a loan should always be from your primary bank as the bank will understand your needs best,” notes Sibiya.
Shop around
Once you have started the process of getting loan quotes, you have five days to accept the quote. The quote and its terms and conditions will stipulate all the details of the loan such as the loan amount you have applied for, your monthly repayments, the interest rate you will pay, how long it will take you to pay off your loan, the insurance charges, service and initiation fees you will be liable for as well as the total amount you will end up paying on your loan.
“You need to be 100% sure that the loan is the best fit for your needs and that you will be capable of servicing it for the full duration of the loan. It is therefore important to have a budget and stick to it,” advises Sibiya.
Protect your family by insuring your loan
In most instances, your quote will also include a fee for insurance in the event that you are unable to pay your loan due to death, temporary or permanent disability or retrenchments. You should be able to get this insurance through the provider of your loan but the choice is yours as to whether you would like to make use of an external provider. If you choose not to take the insurance that you are offered through your lender, you must supply proof that you have or will have a policy in place which offers you suitable cover for your loan should the need arise.
“Although the loan provider can stipulate what type of cover you need to take out, be wary of providers who want to force you to take a certain policy right there and then. You have the right to weigh up your options while the quote is valid and you are under no obligation to put pen to paper immediately. It is more important that you are comfortable with all of the Terms and Conditions and what will happen in the case of skipping a payment rather than rushing to finalise the process,” emphasizes Sibiya.
Early settlement
If you are in the position to settle your loan early, contact your lender and request a settlement quote. Registered credit providers do not charge any penalties on early loan settlements. As with the initial application quote, you will have a certain period in which to settle your loan as the loan value will change after the settlement quote expiry date.
“Remember that it is not advisable to take out a Personal Loan to cover the costs of goods with a short life span. Instead, turn to a loan for large expense such as home improvements that, in the long run, will add value to your assets or a study loan to improve your education,” concludes Sibiya.
