Even though the South African economy has suffered a major downturn, online personal loans offered in the country are still abundant. They are available from leading banks such as Grindrod Bank, Standard Bank and Bidvest Bank and from smaller lenders in virtually all towns and cities in the country including Cape Town, Durban and Johannesburg. It is important to be well familiar with these financial products before you choose one. The term of the loan is a major feature to look into.
Most personal loans have a term between 1 and 5 years. The term is usually determined based on the principal amount granted to the borrower.
The larger the principle is the longer the term of the loan is and vice versa. In some cases, when the principal is quite big, the loan can have a term of up to 10 years.
There is a clear link between the term of a loan and its cost and monthly payments. The longer the term is the more expensive the product is. This is because interest is charged for a longer period of time. On the other hand, a longer term results in smaller monthly payments. This is because the due principal and interest payments are spread over a longer period of time. Hence it may turn out that a costlier loan is actually easier to repay and comes with a lower risk of default.
The instant cash loans which are also in the category of personal credit products usually work a bit differently. The principal and interest are due on the next pay day of the borrower. Both amounts are clearly set. Hence, the term is fairly short.
You decide what term will be best for you when taking out personal loans.