If you are in urgent need of cash, there are basically 2 types of loans you can consider. One is known as a payday loan, and the other is what is known as a personal loan.
However, if you are in need of same-day cash, such as a short term loan – repayable from your next pay cheque, then a payday or month-end loan will be the better choice.
A personal loan will take much longer to provide the cash, and there is paperwork involved. A payday loan is obtainable on the same day, and there is no paperwork.
Even the best monthly budget can sometime come adrift if an unforeseen emergency crops up. You may suddenly need some extra cash to tide you over until month-end. This is where the payday loan benefit comes into the picture.
The good thing about it is that the cash is available immediately.
About payday loans
Here is some information for people who need quick cash in the form of a short-term loan.
- Payday loans are unsecured and require no collateral.
- You need to provide your SA ID number, or a copy of your ID, proof of employment, your 3 latest payslips or 3 latest bank statements showing income deposited.
- Once the documents have been received by the loan company, approval is usually guaranteed, and in most cases, the cash is paid out on the same day.
- The loan period is normally from 15 to 31 days.
- Payment is made from your next pay cheque, and needs to be at the stipulated time or penalties may apply.
- Most SA loan companies offer loans from R500 to R8,000, depending on what you can afford.
- To apply, you must be a SA citizen, over 21 years of age, and have a regular income.
- Consumers who are blacklisted or under debt review are not eligible for payday loans.
- No fee is payable when you apply for a payday loan.
Short term loans help folk to manage their cash flow when emergencies arise. A quick cash loan for a short period can certainly obviate an unexpected financial disaster.
How do payday loan companies make money?
You may wonder how the payday loan providers make money if no upfront fees are payable. Well, they make money from the interest charged on loans. Also, the risk for the companies on these loans is not very high. For example, if you apply for a loan of R7,000, and you only earn R11,000 per month, the loan will not be granted. The loans are therefore usually quite small, and have to be paid back in 30 days, or a further advance will not be available.
What rate of interest would be payable?
Like traditional loans, payday loans come with an interest rate percentage. South Africa’s payday loan rate is quite reasonable, compared to some other countries where there is no regulation.
Recent legislation in SA has decreed that payday lenders may only charge a maximum of 5% per month.
Your repayment would then the amount of the loan, plus 5% interest. If you borrowed R1,000 your payment when due will be R1,050.
Bear in mind, that if you pay late, or miss a payment, penalties will apply.
Are there many loan companies to choose from?
Yes, there are several companies to choose from. The sheer numbers of South Africans who now use payday loans, has resulted in loan companies springing up like mushrooms to get in on the act.
Although some banks have also entered this market, the number of smaller providers has actually been reduced.
You should shop around to get the best deal before selecting a payday loan company. But be warned, always choose a legitimate, reputable outfit, as there are many sophisticated scammers out there, just waiting to steal your identity and take whatever they can.
It is also important to find a company who has an encryption policy to keep your data safe.
A legitimate company which offers good service and good terms, knows that a happy client can mean repeat business if a further loan is need in the future.
LittleLoans works exclusively with the most trust-worth payday loan companies in South Africa. So when applying for a loan through LittleLoans you can rest assured you will be dealing with legitimate lenders.
What if I cannot make the payment on my payday loan?
We live in uncertain financial times, and if you do not manage your finances properly, you could land up in a monthly cycle of initiating a payday loan to make ends meet.
There might come a time when you may be struggling to make the payment on your payday loan. Should this occur, here is some advice on the best way forward:
- Contact your credit provider without delay and explain the situation.
- Negotiate a payment plan to pay off the loan, as circumstances prevent you making the entire payment in one go at month-end.
- If you have a debit order on your account for the repayment, remember to cancel it. Even though you have negotiated a new payment plan, gremlins sometimes creep into the best systems, and your account may still be debited.
- Do not default on a payment, as you will incur extra charges added to your balance.
Most companies do not want to blacklist you, or put the debt collectors on your tail. They will hound you endlessly, even for a small amount like R1,000, plus of course their charges! Reputable loan companies are there to help you, and they value your business, even if you land up in difficulties. Just keep the lines of communication open.
So is a payday loan a wise route to follow?
Here are some of the benefits:
- Payday loans are offered with minimal interest rates, and extreme convenience.
- You apply, get approved, money is usually deposited on same day, and you repay when next you get paid.
- You can use the loan to pay for basic necessities if there is an emergency that may cause you to run short of cash.
- There are no fees payable on application, only the interest which is added. This is calculated when you take out the loan, so you know exactly how much the repayment is.
If you want a short-term payday loan when things go wrong, to help you make sense of your money, then a payday loan is the way to go.
