Bank Loans

South Africa’s leading banks, First National Bank, Absa, Standard Bank, and Nedbank, offer a wide variety of loans to meet their customers’ individual needs. Bank loans are backed by a reputable name and thus offer patrons a greater sense of security. 

If you’re looking to take out a bank loan, it is important that you have a basic understanding of the different types of loans on offer, the terms and interest rates provided, and the repayment period options.

Types of Loans

There are two main types of loans that banks offer; secured and unsecured loans. A secured loan is simply a loan that is extended to you on the condition that you provide one or more of your assets as collateral. You will be charged a competitive interest rate on a secured loan, but if you default on repayments then you risk having your property or your vehicle repossessed.

An unsecured loan is one where you do not provide any form of collateral in exchange for a loan. Since there is more risk involved for the bank, you will pay a higher interest rate on the loan.

Terms and Interest Rates

Interest rates are varied depending on the size of the loan requested, the lending institution, and the terms of the specific loan. Shop around for the most competitive interest rate.

In some cases, like a home loan, you will have the option of choosing between a fixed rate loan and a variable rate loan. A fixed rate loan will set your interest rate for a specified period so that you will not be subject to interest rate fluctuations. On the other hand, a variable rate interest loan will be determined by market inclinations. If the market rate goes up, so will your loan interest rate and your monthly repayments.

Repayment Period

Repayment periods are subject to the type of loan that you select and the bank that you choose. With a home loan it could be anything from 5 to 30 years, with a personal loan it usually varies from 24 to 84 months, and the repayment period for vehicle finance is generally up to 84 months. 

One thing to remember is that you need to calculate the interest that is incurred over the total repayment period. Often loan providers will lure you by offering a competitive monthly interest rate if you take the loan over a longer period; however, when you calculate the total interest accumulated over the entire repayment period, you may discover that you are paying a hefty sum in the long-term. Also, beware of loans that offer you an initially low monthly repayment, only to beef it up further down the line.

What Loans do Banks Offer?

Banks offer loans that are tailored to suit individual needs. There are different solutions for different financial requirements.

• Home Loans

There are a variety of home loan options available. Dependent on whether you meet the lending criteria, a bank will grant you a loan to cover the asking price of a property owner. You can choose a repayment period of anywhere between 5 and 30 years. There are also a number of loan types available; the main categories are the fixed rate home loan, variable rate home loan, and the capped interest rate home loan.

• Personal Loans

A number of banks offer small to moderate loans for personal use. These loans can be used to finance anything and they take a relatively short amount of time to process – perfect for when you need cash, and you need it fast. The repayment period is usually flexible and can be paid off in a period of up to 84 months.

• Student Loans

Banks offer student loans to people who are looking to finance their studies. A student loan can be taken out under the name of a sponsor or guardian who is able to provide proof of monthly income. You will be required to pay the monthly interest on the loan while you study. After your studies are completed, you will be responsible for paying the loan capital. 

• Vehicle and Asset Finance

Purchasing a car or asset is made easy through tailor-made loans. An installment sale agreement allows you to purchase a vehicle or asset and repay the loan over a negotiated time frame. Most banks also offer lease and rental agreements if you’re looking for the immediate benefits of an asset without the long-term commitment. 

• Overdraft

Overdraft facilities are available on most bank cheque accounts. A line of credit is extended to you when withdrawals exceed your account’s overall balance. This facility most often comes with a negotiable interest rate.

Conclusion

There are a number of bank loans to meet your individual requirements. Whether you’re looking to purchase a home, to finance your studies or to buy a new car, there is a tailor-made loan for you.