Credit, financing and loans

Personal loans

Personal loans are useful for bigger purchases or expenses like school fees, a family wedding or the deposit on a car or home. The amount you qualify for depends on your income and your credit record. Different types of personal loans include:

• Revolving Credit Plan loans (RCP)
  This is a loan with a fixed monthly repayment. An RCP lets you borrow again up to your original loan amount, once you have repaid a portion of the loan.
   
• Overdrafts
  This is a credit facility loaded to your current account. You can use as much of your agreed overdraft limit as you need whenever you need it, as the total limit is always available for you to use.

• Student loans
  This type of loan will cover the costs of your studies. If you are a full-time student, you will only need to start repaying the loan when you have finished studying.

If you want to apply for a loan, make sure you understand the costs, charges, terms and conditions of the loan agreement.

Credit cards

A credit card is a form of payment that allows you to buy goods and services now and pay for them over a period of time. When you get a credit card you will be given a credit limit. This is the total amount you have available to spend on your credit card.

You can use a credit card to pay for goods locally, internationally and via the internet. You will have to repay the amount you spend on your credit card in monthly instalments. You will receive a credit card statement every month which tells you the minimum amount you must pay.

If you do not pay off your balance in full each month, you will be charged interest on the amount you still owe on your card, so make sure you check how much interest you will be charged – and whether you can afford it.

Vehicle finance

Most financial institutions offer flexible finance options that will allow you to buy the car of your dreams and pay for it over a period of time that suits you. These include:

• Instalment sale – allows you to buy a vehicle and pay for it over an agreed period. Ownership will pass to you automatically once you have made the final payment.
• Financial lease – gives you the use of the vehicle while you are paying for it over an agreed term. Ownership does not pass to you automatically but is one of the options available to you at the end of the contract.

Vehicle finance is usually offered at a fixed rate, which means you pay the same interest rate over the loan period. Fees and charges are usually included in your monthly repayment.

Home loans

For most of us, buying a home is the biggest investment we will ever make. It can be hard to know where to start when it comes to applying for a home loan, but most financial organisations will help you with the process. Generally, you will have to meet the following criteria:

• You have to be 18 years or older, or be an emancipated minor
• You have to earn a single or joint gross monthly salary of R3 500 or more
• You need to have a transaction account into which your salary is deposited
• You will have to supply certain documents, such as proof of income, three months’ bank statements and a list of your assets and liabilities

If you want to pay your home loan off sooner, try and pay a little extra into your home loan account every month, as this will help you to reduce the interest and shorten the term of your loan.