Advice

Types of loans

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Looking for a loan? The two most common types of personal loans are secured loans and unsecured loans.

Personal loans

Personal loans are typically repaid in instalments on a monthly basis and can run for loan terms of up to 24 months. Wonga’s personal loans allow you to borrow up to R4000 for first time customers and up to R8000 for existing customers for as long as 6 months. These loans allow you to repay your loan in monthly instalments on a pre-selected repayment date rather than as a single repayment which can help you budget more effectively.

Personal loans are typically offered in two different ways which have important differences; secured loans and unsecured loans.

Secured loans

Secured loans tend to be for larger amounts of money, say over R100 000, and for longer periods of time, typically five years or more. Home loans are a form of secured loan, whereby you borrow money against the value of your property. But smaller secured loans exist, which are also tied into your personal assets.

If you miss repayments on a secured loan, you risk losing the assets tied to the deal - often your house. The main benefit of secured loans, other than being able to borrow more money over a longer period, is that the interest rates on offer tend to be low and can be fixed or variable.

The most common uses for secured loans are home purchase, debt consolidation, paying for university, large medical expenses, buying a car and home repair.

Unsecured loans

Unsecured loans are usually used for smaller sums, of R5000 or more, and over shorter periods of time, say a few years. They don’t require any personal assets to be tied into the agreement, although failing to repay the loan will still have serious consequences.

Short term loans online, such as Wonga loans, are also unsecured loans. This type of loan is usually for sums of up to R8000 and for short terms of up to a month. Wonga loans are not secured by an asset but, much like the larger unsecured loans, there can still be serious consequences for non-payment. Always consider your ability to repay any form of credit very carefully before you apply.