Many lenders, such as Capitec, FNB, Standard Bank etc. offer unsecured loans to consumers who have good credit profiles, who they trust to repay them. If you don’t have any savings, these unsecured loans are a quick financial solution you can use in an emergency.
The biggest advantages of these loans are their speed and convenience. Provided you maintain your excellent credit profile and always make timely repayments, of course. On the other hand, these loans also have quite a few disadvantages, especially for people struggling financially.
High Interest Rates
As a rule, lenders i.e. Wonga, Loans Direct, Capitec Bank etc. charge much higher interest rates for these loans. They are riskier to lenders because they aren’t secured with assets, in case you fail to repay them.
Small Loan Amounts
Lenders, e.g. African Bank, Old Mutual, Capitec Bank etc. usually only offer small amounts for this variety of loans. Once again, this is because of the risk that these loans pose to the lender. The borrower does not put up any collateral; in case they fall into arrears or default on their financial obligations, leaving the lender in the lurch.
Tight Repayment Deadlines
Similarly, due to the increased risk involved with granting these unsecured loans, lenders, for example, Rainfin, Lendico, Capitec Bank etc. will only allow you a short period of time to repay them the total amount owed.
Lenders like, say, Nedbank, Capitec Bank, Absa etc. will then cap the repayment term or deadline to 3 or 4 years. Whereas, if these loans were secured with assets, you would have 10 to 15 years to repay them off in full.
The Debt Trap
It is very telling that you have not managed to build up any savings and urgently need loans. Given the tough economic outlook, it is essential that South African consumers budget for unexpected problems that don’t require taking on more debt.
Imagine if another financial crisis were to strike. You would be even less equipped to solve the problem because of the repayments you have to make. The better option is to approach National Debt Advisors for a debt relief alternative. Please send us your contact details for a same-day free call back.