Learn about Loans

Sometimes you may need to borrow money from a bank or registered money lender to pay for an emergency or special project.  Perhaps your car has broken down or you have an unexpected funeral to pay for. Before you take a loan to cover these costs, make sure you understand the conditions of your loan and how much it will cost you in total. Here's what you need to know about loans to be WalletWise.   

What is a loan? 
A loan is an amount of money you borrow from a bank or registered money lender. Every month you will have to pay back a portion of that loan plus the cost of borrowing it, also known as the interest. There may also be an upfront administration fee which includes insurance. It is your right and your responsibility to find out exactly what your loan will cost you in total. Most importantly, you must find out what your monthly instalment will be and if you can afford it on your current budget. If not, it may be worth trying to save money, rather than taking out a loan. Remember you are responsible for the full payment of the loan.  

Questions to ask before taking out a loan: 
• Can I afford to make the monthly payments? 
• What is the cost of the loan?  
• How soon will I be able to pay it off?   
• What is my reason to take the loan? 
• What products are out there for various needs? 
• How does it work? 
• What interest am I going to pay?   

Understand the terms and conditions of your loan. 
 out a loan may seem like a quick and easy way to pay for something you don't have money for, but it comes with added costs. Remember, different lenders can charge different rates. A bank, a mashonisa or your employer – no matter who you borrow money from, read through your contract very well before taking out a loan. It is your right to receive your contract in your home language so ask any questions you have before signing on the dotted line.   Under the right circumstance, a loan can be very helpful.  It is your responsibility to make sure you understand what it will cost you and if you can afford the monthly repayments. Do your loan homework and be WalletWise.