Personal loans can be used for various reasons. They are not like other loans where you lend the money for a specific purpose, like for a car or a mortgage for property. It is clear that the interest rate on a personal loan is most likely to be a bit higher than the rest. There are thus different types of loans, and it is important that you educate your self on the topic to make sure that you choose the right loan for you.
The fist type of loan that I will describe is called an unsecured personal loan; it is also being referred to as a signature loan. This form of loan only needs a signature that states that you will repay the loan. Because the lenders are at risk of loosing money if you do not pay them, you will find that the interest rates are very high on these loans. It is important that you know that you will be penalised if you are late with any payments and you will also be penalised if you pay of the loan earlier than the agreed time.
Next I will explain secured loans. Secured loans are very popular in South Africa. The banks are also more lenient on their wallets if you choose to obtain this form of loan. The reason for this is because you must be able to put something down as collateral to secure the loan. The banks are then at less risk and you are at risk of loosing your house or car if you fail to support the loan. You will find that the interest rates are also very low on these forms of loans because the banks are at less risk. It is important that you know that you will not be allowed to sell the piece of collateral whilst in the contract of the loan.
It is important that you know that there are loans with fixed interest rates and variable interest rates. You will find that loans with a fixed term will normally have a fixed interest rate. You will be told exactly what rates and fees you will have to pay before obtaining the loan. Loans that don’t have a fixed agreed term are normally the ones with the variable interest rates. It all depends on how long it takes you to repay the loan.
If you have a bad credit score, then it's highly unlikely that you will get a loan. Get your credit score first and see where you can improve.
To conclude. It is important that you educate your self on the topic before approaching a lender. Make sure that you are armed with the right knowledge to make the correct decision. Also make use of a popular and reputable company; there are a lot of scammers out there that you need to be aware of.