Your car breaks down. Your roof needs emergency repairs. You’re between jobs.
These are just a few of the reasons why South Africans seek financial aid from short term loans, every single day.
If you’re one of the thousands of South Africans without adequate savings that need to deal with an unplanned expense, you may be interested in understanding more about short term loans.
What are they? How do they work? What are your obligations when taking one out?
To educate you on short term loans and help you decide if they’re right for you, our team at LittleLoans has put together this comprehensive guide. Our aim is to define what short term loans are, illustrate how they differ from long-term loans and lay out what your obligations are under them.
What Are Short Term Loans?
A short term loan is a loan you can pay back quickly. Timetables for short term loan repayments vary from lender to lender but typically you’ll pay these loans back within one to three months.
The reason why these loans are easy to pay back quickly is because they’re made for those who need fast, small amounts of cash immediately.
Again, loan amounts will vary by lender. Expect an available loan range of R500 – R8,000 from most reputable lending companies.
Loans are attainable as fast as the same day you request them upon approval.
How Do I Qualify For a Short Term Loan?
Short term loans are among the most accessible loans available to South Africans. Still, there are some basic requirements you’ll need to meet to be eligible to apply.
The base criteria is as follows:
- You must be a legal citizen of South Africa
- You must have regular, provable income
- You must be over 21 years old
What Are the Credit Requirements for a Short Term Loan?
Your ability to attain a loan, even one that is short term, may get affected by your credit. Credit requirements vary by lender, however, if you are blacklisted or under debt review, you will not qualify for a loan.
Will Applying for a Loan Hurt My Credit?
One of the primary concerns South Africans have when applying for loans is if the simple act of having their credit checked will damage their credit score.
Generally, when lenders perform a “soft pull” or “soft inquiry” on your credit, the damage sustained to your score is minimal. If lenders perform a hard inquiry, the effects can be more noticeable.
Soft inquiries just look at topical information in your credit history. A hard inquiry gives lenders a more comprehensive picture of your credit. It lets them know your borrowing history, if you paid your loans back, how quickly you paid back your debts and whether or not loan applications you filed were accepted.
It’s important to note that hard inquiries tend to fall off your credit reports within 12 months. Because of that, any damage caused by them is temporary.
What Is the Difference Between a Short Term and Long Term Loan?
The core difference between short term and long term loans is the period in which borrowers are expected to repay. While most loans that are short term are paid back in months, long-term loans can have repayment periods of years.
Having longer-term loans can be helpful if you need to borrow amounts larger than R8000. It lets you spread out your loan payments so the amounts due each month are usually smaller than with a shorter term loan.
Still, the longer your loan period the more fees and interest your loan may be subject to. For that reason, if the amount offered by a loan that carries a short term is adequate for your needs, it’s advisable to opt for the short loan.
Do I Have to Pay My Short Term Loan Back in 1 – 3 Months?
At the beginning of this post, we mentioned that most loans that carry a short term are paid back in 1-3 months. That’s because loans with short terms are sometimes referred to as “payday loans”. That means that borrowers take out money and repay the loans when they receive their next paycheck.
Still, the exact payment plan set up by the lender you use will vary. Most lenders will offer flexible payment options to suit your unique needs.
What Fees Should I Expect to Pay?
Costs commonly associated with loans are initiation fees, service fees, interest, and VAT. These may vary based on the amount borrowed.
Given the speed in which you’re able to attain a short term loan and the flexibility you can expect during your payback period, the fees involved in taking out a loan are usually reasonable.
The Bottom Line
Thousands of people all over South Africa face a similar dilemma. Unexpected expenses that need their attention and inadequate savings to cover them.
If you’re finding yourself in a situation like this, it’s important to know that you’re not alone. Also, know that there’s help available.
You can apply for loans that offer short terms, reasonable interest rates, low fees and high borrow amounts. These short term loans give you the assistance you need today, to help ensure a better tomorrow.
If you’re a South African citizen looking for quality lenders for a loan amount ranging from R500 – R8000, our team at LittleLoans have what you need!
We connect South Africans in need of loan assistance with quality lenders all over the region with a single application. What that means for you is that you get higher chances of getting the loan you need, fast.
Get the money you need today by visiting LittleLoans.
For more general information on financial matters, read more on our blog.