Loans
There are many different kinds of loans available. I would like to explain which ones to avoid at all costs and what to do if you have too many already. Also please note that I am writing this from my own experience and research done on the web. I am not affiliated to any financial institution or an accredited financial advisor.
Personal or Cash Loans: The definition of a personal loan according to Wikipedia is an unsecured loan. Personal loans do not have any collateral to back them up in the event of non-payment. Be VERY cautious of taking out a personal loan from anyone other than one of the major banks. Other micro-lending companies charge an incredible amount of interest on their loans and they can be ruthless when you don’t pay. I don’t mean they will break your knee caps, but they will blacklist you in a heartbeat. Banks need to follow procedures when you don’t pay before they blacklist you. Keep in mind that not all banks use the same interest rate for repayment of loans. Do your research and see which bank is willing to offer you the best interest rate. You will be surprised at the different rates these institutions offer. Also keep in mind that in accordance with the National Credit Act, banks are obliged to be completely transparent with ALL charges you need to pay them, including admin fees. So ask anything if you don’t understand something… it’s your right.
Payday Loans: Most banks offer payday loans to their clients if their credit rating is acceptable. These loans can sometimes even be made at ATMs! Basically what happens is you take out a small loan from the bank. They forward you the cash at a nominal fee and then take full repayment from your salary when it is paid to you from you employer. Although this kind of loan may seem very attractive, try and avoid them. The problem with this kind of loan is that you will get paid less at the end of the month and may find yourself in worse trouble than you were before! If you know that a pay increase or bonus will be paid out at the end of the month, then a payday loan can be an effective buffer when in financial trouble.
Credit Cards: Although many people don’t see credit cards as a loan per se, it does, by definition qualify as one. A financial institution will advance you a line of credit (your credit limit) and take repayments at an interest rate. Last time I checked, that is exactly what a loan was. Credit cards and clothing accounts are often referred to as revolving credit. The reason for this is that once you have paid funds into the account, you can borrow more money again. This can effectively lock you in debt forever!
These are only a few of the loans available to the public at the moment. Whenever you are considering taking out a loan of any kind, be sure to research all your options to ensure you get the best interest rate. Make sure the repayments fit into your budget and above all, decide whether you actually need the debt or whether you could do without it.