Frequently Asked Questions
Need more information on any of the products featured on Friendly Finance? Please see our range of Frequently Asked Questions below.
No, Friendly Finance is a comparison service. However, we do work directly with authorised lenders to provide you with the best loan offers in the market. All the loan offers in our comparison table are services provided by direct lenders.
The services offered by Friendly Finance are free of charge. It will not cost you to click through to a financial providers website. Once you have been redirected to your provider of choice, you may apply for the product. Most providers do not charge you to apply, however, Friendly Finance is not responsible for the providers, so please check their website for more details.
Yes. When you click ‘Apply Now’ you will be directed to the provider’s website. The provider will consider this an introduction from Friendly Finance. Clicking through to a deal is free of charge for you as the consumer.
Each lender will have its own criteria that a customer needs to meet to be accepted for a loan. Once you have chosen the lender that is right for you, visit their website and apply for a loan to see if you are eligible. As a rule of thumb, applications must meet the minimum criteria of being over 18 years of age, a South African resident, having an active bank account and being in full-time employment.
APR (annual percentage rate) is the annual cost of credit. For example, if you borrow R2,000 and the APR is 6%, the cost of credit over 12 months will be R120. APR is a useful comparison tool to understand which loan product is the cheapest. We advise you to take into consideration that APRs will appear high for loans with repayment periods less than 12 months. In these circumstances, it may be easier to measure how ‘cheap’ a loan is by calculating the total amount to be repaid minus the loan amount.
Friendly Finance does not require any personal information from you, nor will we undergo any credit checks. When you apply for your financial product, the provider may need to run a credit check as part of the approval process. Please check with your provider directly.
Short-term loans usually have a principal ranging between R100 and R4,000 (first-time customers) or R8,000 (returning customers). They can be repaid between 1 day and 6 months, and often have high-interest rates and charges relative to their principal. These are legally capped at 60% per annum, which amounts to 5% per month, though some lenders do charge less than this maximum.
Short-term lenders charge two fees. This includes an Initiation Fee of 15% of the loan amount for loans smaller than R1,000, and R150 +10% for every R1,000 loaned, for loans bigger than R1,000. There is also a Service Fee of R57 per month that lenders are able to charge.
People who need quick access to credit, but who can’t access this credit from traditional sources such as a credit card or bank loan, sometimes turn to short-term loans.
Short-term loans are usually not advised as a long-term financing solution or to manage existing debt, however, as a result of their relatively high-interest costs and fees. Rather, they are usually a way to tide you over for a few days between pay days.
There are several different ways to apply for a short-term loan depending on the lender, however, the most common include applying online, applying over the phone, applying via a cell phone app, and applying in store if the lender has physical storefronts.
When you apply you will need to input the amount you want to borrow, the time period you will pay it back in, and when your next payday is. Regardless of your method of applying, most lenders will require that you provide a range of documentation that demonstrates your identification, creditworthiness, and ability to repay the loan. Your credit history and financial situation will often determine your interest rate on the loan.
The lender will also often require details of your employment situation (salary amount and frequency, part-time versus full-time work) and details of your financial situation (expenses, assets, obligations). They will also need your banking information, in order to transfer you the funds and then set up your direct debit repayments.
Approval (should you receive it) usually takes just a few hours, and funds can often be in your bank account by the same business day, depending on when you apply and what financial institution you use.
All lenders of short-term loans usually request that you provide documentation that proves your identity, such as an ID card or passport.
Most lenders will also require proof of your financial situation, such as payslips and/or 90 days of bank statements. Some will also request credit card statements, copies of bills, other credit contracts you may have, rental statements, mortgage statements, or any other documentation that demonstrates your financial position and ability to repay the loan.
Most South African lenders who offer short-term loans have the following basic eligibility criteria:
• At least 18 years old
• In possession of a South African identification number, and a bank account
• Able to repay the loan and all associated costs
Most South African lenders undergo a credit check of any applicants wanting a short-term loan. This is usually through a credit bureau, such as TransUnion or Experian, and credit scores are usually rated according to the following:
• 750+: Excellent credit score
• 720-749: Very good credit score
• 680-719: Good credit score
• 620-679: Sub-prime credit score
• 619 and below: Poor credit score
Some lenders don’t actually require a credit check, and only assess whether you will be able to repay the loan according to your current financial situation. Others will still lend to applicants with a poor credit score, so long as these applicants demonstrate they are able to repay the loan. Others may approve the loan but at a smaller loan size, to increase the possibility that the borrower will be able to repay the loan.
The approval time for short-term loans can differ across lenders. So can the time taken to receive the funds, depending on your financial institution and the lender’s processes.
Most lenders now use automated, online systems that can complete the assessment within an hour, so long as you have provided them with all the information and documentation required to make a decision.
If you apply before 4.30pm on a Monday to Friday, you may also be able to receive the funds in your bank account within one hour. If you apply outside of these hours, you will sometimes receive the funds by the next business day. This will depend on your financial institution.
In South Africa, the most common way to repay a short-term loan is in one payment as soon as your next pay day arrives. This usually occurs in the form of a direct debit.
If you can’t repay your short-term loan you should contact your lender immediately and let them know you’re having difficulties.
Some lenders will be able to readjust your repayment terms so that you can more comfortably meet your repayment obligations. This often incurs a late payment fee of some type, however, or may result in higher total interest payments if the repayment period is extended.
Some lenders may offer to halt fees and charges on the loan in extreme circumstances, so it’s always worth enquiring about your options. It’s never advisable to take out another short-term loan to pay off a first short-term loan.
Personal loans are larger than short-term loans and are usually paid back in monthly instalments that include a portion of the principal, and an interest charge. The repayment period on a personal loan can vary, but it is often between 12 months and 6 years.
The interest owed on a personal loan can either be charged at a fixed (unchanging) or variable (fluctuating up and down) rate. The rate is typically specified in the credit contract that outlines all of the details of the loan. Personal loans can also be secured (have an underlying asset attached to the loan) or unsecured (no underlying asset).
Personal loans come in a variety of different forms.
SECURED VS UNSECURED PERSONAL LOANS
Secured personal loans have an underlying asset that reduces the risk for the lender because they have the right to sell the asset if the borrower defaults. Because of this lower risk, the interest rate charged is usually lower.
Unsecured personal loans do not have an underlying asset attached to the loan, so typically attract a higher interest rate to compensate the lender for the greater risk involved.
PEER-TO-PEER (P2P) OR MARKETPLACE LOANS
Peer-to-peer or marketplace lending involves connecting investors (lenders) directly with borrowers (individuals or organisations) through an online tech platform. Because there is no large intermediary, such as a bank or a credit union, the cost of these loans to the borrower is usually lower, and investors are thought to achieve a higher return. The owner of the tech platform usually makes their money by taking a small cut from each transaction, in the form of a fee or charge.
This type of lending is relatively new to South Africa.
Overdraft personal loans are taken out when a borrower withdraws funds from their own bank account, past their actual available funds. Overdraft loans usually come with a relatively high-interest payment or fee payable each time the funds are used.
LINE OF CREDIT
A line of credit personal loans is taken out when a borrower draws down funds from the equity in their property. These funds can be used immediately or over time, and an interest rate must be paid on the total amount taken out. A line of credit personal loans are similar to credit cards, but usually, have a lower interest rate and a much larger limit. They require a great deal of financial self-discipline.
Personal loans can be used for anything that the borrower chooses, such as to pay for a holiday or a home renovation, to enrol in a course or university degree, or to finance a wedding or another personal expense. The lender often doesn’t enquire about the purpose of a personal loan.
There is a range of basic eligibility criteria that most lenders look for in an applicant for a personal loan:
• Being 18 years or older
• Having a South African ID or passport to prove your identity
• Earning an income and financial situation that will ensure you can repay the loan, including associated interest costs
South Africans who wish to take out a personal loan can apply via a range of channels. Some lenders offer online applications, phone applications, postal applications, and also in-person applications.
The documents and information required during the lending process can differ slightly from lender to lender. Borrowers are usually first required to state the loan size and repayment term, whether the personal loan will be secured or unsecured, and if you would prefer a fixed or variable rate of interest. They will then need to supply a range of supporting documentation, such as proof of identification, banking information, and details about their financial situation.
Once everything is submitted, it can take several days for the lender to assess your application, and come back to you with a decision, or to request further documentation. Different lenders will also transfer your funds (if approved) within different time frames. Some can take as little as several hours whilst other may take a few days.
Every lender has a slightly different application process, including which documents are needed to apply for a personal loan. Some of the more common documents include:
• Proof of identity, such as a passport or South African ID
• Proof of income, such as payslips
• 90 days of bank statements
• Information about any debts, assets, savings, expenses, or other proof of your financial situation
Most lenders will allow you to repay your personal loan early, but sometimes there is a fee charged for doing so. This is especially the case if you’re being charged a fixed rate of interest.
When you choose a personal loan, there are a number of things you might consider.
FIXED VS. VARIABLE INTEREST RATES
Fixed interest rates stay the same for the life of the loan, meaning you will always know how much you owe each month. However, you may have to pay a fee if you want to repay your loan early on a fixed interest rate. There is also the possibility that you will miss out on lower interest costs if the variable rates drop during your loan term, and you are held to the higher fixed rate.
Variable rates can fluctuate during the lifetime of your loan, meaning you can’t always budget your repayments exactly. If rates drop during the loan term, you may benefit from lower interests costs. However, they may also rise, meaning you will have to pay more. There is often a lower, or no, the cost for early repayment of a personal loan with a variable rate of interest.
FEES AND CHARGES
Personal loans often have a range of fees and charges that can be incurred under a number of different situations. Some fees occur regularly or are a normal part of the loan, such as an establishment fee or a monthly service fee. Others occur if you diverge from the terms of the loan, such as if you miss a payment, pay late, or repay the loan early. Some are transactional, such as fees for checking your balance or paying using certain methods. Ensure you review all fees and charges when calculating the total cost of borrowing.
EARLY REPAYMENT OPTIONS
You may want to repay your personal loan early, so you should check whether this will trigger an early repayment fee.
If you can’t repay your personal loan, the best course of action is to let your lender know as soon as possible. They may have a process in place that will help you to repay your loan at smaller, more affordable increments, over a longer period of time. The sooner you can contact your lender in this type of situation, the better. Ignoring the issue and simply not paying may result in a number of late and default fees, as well as interest payments building up.
A car loan is a type of personal loan that is taken out to finance the purchase of a car or another type of vehicle. Sometimes the loan is secured against the vehicle being purchased (if it’s new), and sometimes it’s unsecured (especially if the vehicle is second hand).
Car loans can also have fixed or variable interest rates, and are also offered by some peer-to-peer lenders.
You will usually need to provide the following if you want to apply for a car loan:
• A South African driver’s license
• Details of your ability to repay the loan, including your income, expenses, assets, and liabilities
• Information about the make and model of the car, including how old it is and whether it’s been imported
Car loans can be applied for online, over the phone, or at a dealership. This usually involves giving the lender details of the car, such as its make, model, how old it is, and how much it costs. The lender will often ask for a range of information and documentation that proves the borrower will be able to repay the car loan, including any associated interest expenses.
Once the application has been approved, many borrowers can have their funds on the same business day.
Some lenders allow the borrower to also purchase car insurance, and add the cost of this to the principal amount. This means the cost of the insurance will also accrue interest expenses.
Many lenders provide pre-approval on car loans, meaning you can shop for your car with a good understanding of which cars you will be able to afford.
Some lenders only offer car loans for new vehicles or a vehicle that is less than 2 years old. However, many lenders will finance second-hand vehicles too, so it pays to shop around. You may also find that some lenders are hesitant to finance imported vehicles, so this is also worth asking about.
You can take out a car loan for a vehicle purchased through a dealer or in a private transaction. However, sometimes lenders will require different types of documentation for these different transactions.
Most lenders will run a credit check before issuing you with a car loan, to ensure you are suitable for the loan. Lenders who don’t run a credit check may instead only assess your ability to repay the loan, based on your current financial situation. These lenders can sometimes charge a higher interest rate to account for the higher risk associated with your potential lower creditworthiness.
It is not compulsory to have vehicle insurance in South Africa. In fact, research has shown that roughly 65% of motorists on South African roads are uninsured. This leaves a large number of people at risk when getting behind the wheel.
To apply for car insurance in South Africa, you will first need to specify which type of policy you are after, and request a quote.
To get your quote, you will need to provide a range of details about your vehicle and how you use it, and also give information about any drivers who will be covered. This can include your vehicle’s make and model, whether you have made any modifications to the vehicle, how frequently you drive, and where the vehicle is commonly parked. It will also include outlining the driving history of anyone who will be covered by the policy, and their age.
Once you’re happy with your quote (you may wish to get several different quotes from different providers), you will then need to complete your application by providing more information. At this stage, you may need to go into greater detail about any past accidents any of the drivers may have been involved in, or the exact modifications you may have made to the vehicle.
Car insurance premiums are usually calculated according to a number of different factors:
• Which policy, level of cover, and excess you’ve chosen
• Where you park your vehicle during the day and where you leave it at night
• The age, driving record, and insurance history of all drivers who will be included in the policy
• The type of vehicle you are insuring, and how you will be using it
• Whether you’ve made any modifications to the vehicle
You can change from one policy to another, but there is sometimes a policy cancellation fee you will need to pay. Your lender may also stipulate a notice period, so it can pay to inquire about this before you sign up to another provider.
It’s also important to ensure that the date your first policy ends coincides with the date your new policy begins, so you’re not driving uninsured for any period during the changeover.
There are three main types of car insurance policies in South Africa.
• Comprehensive Car Insurance: This insurance covers for theft, hijacking, weather damage, and accidents. It will also cover the cost of damages to another vehicle if you are the at-fault driver in an accident. This is the most common type of car insurance in South Africa and is also the most expensive.
• Third party fire and theft cover: This insurance only covers you if your car is damaged or lost due to hijacking, weather conditions, or fire, but not if you accidentally damage your car. This is less expensive as it covers you for less.
• Third party only cover: This insurance only covers damage caused to another vehicle, not your own. It also covers injuries incurred by a third party in an accident, but again not your own. This is the cheapest option as it also covers you the least.
The “amount covered” is the maximum amount of money that an insurer may pay you if your vehicle is damaged or stolen. This is usually outlined in the insurance contract you sign upfront.
The excess is the amount you agree to pay before your insurance company settles your claim. Sometimes you can choose to pay a higher excess, in return for a lower premium on the insurance. If you have an accident and you are the at-fault driver, it’s likely that you will have to pay this in full before the insurance company will begin to settle your claim. If you weren’t at fault in an accident, you may have to pay this anyway, but your insurer should then recover it from the other party and refund you the full amount. Some insurers don’t require that their customers pay any excess at all if they aren’t the at-fault driver.
You will usually need to know the name and registration number of the other driver in order to make any type of claim against them, and avoid paying the excess yourself when you aren’t at fault.
Insurance companies usually insure all types of vehicles, however higher premiums are often applied to older vehicles, second-hand vehicles, imported vehicles, or vehicles that have been modified in some way.
Credit cards are a way of paying for goods and services without using your own cash. Instead, you can pay for things using credit up to the monthly limit on the card, and clear the balance each month, or allow some or all of it to roll over into the next month. If you don’t clear the balance, however, you may be required to pay an interest cost on the remaining balance. Many credit card providers also charge monthly fees, ranging between R0 and R62 in South Africa. Some card providers also charge an initiation fee to set up the service, which is typically much higher if there is no monthly fee involved.
There are a number of different types of credit cards available in South Africa.
These include low rate cards, whose primary feature is their low ongoing cost to holders. There are also rewards cards, which offer a range of incentives for holders to spend more, including cash back offers on travel, fuel and other purchases, and frequent flyers points that allow users to fly more cheaply.
Other types of credit cards include premium cards that give holders a very high monthly limit, and provide a range of luxury extras such as concierge services, travel assistance, and cash back or air miles rewards. Finally, there are credit builder cards for those who have poor, little or no credit history. These often provide holders with lower interest rate options or higher credit limits each time they pay the monthly balance on time.
When selecting a credit card, you should consider a few different factors:
• What you will use it for: What you want to use your card for will impact all other decisions around interest rates and rewards. If you are likely to pay off the entire balance each month, the interest rate won’t matter so much, so you should look for a card with a low annual fee. If you are interested in incentives and rewards, you may want to select a card based on the type of rewards you will receive.
• Initiation and monthly fee: You may prefer to pay a higher initiation fee in exchange for a lower ongoing monthly fee if you have the funds available when you apply for the card. This is a good idea if you think you will hold onto the card for a very long time.
• Interest rates: If you’re unlikely to clear the balance each month, you should look for the lowest interest rate possible.
• Credit limit: It’s important to only have access to an amount of money you know you can pay back, regardless of what the credit card issuer may offer you. You may want to decide what credit limit is right for you before you ask the provider what they are willing to give you.
• Fees and penalties: You may need to pay a range of fees or penalties while using your card – checking your balance, paying late, or transferring a balance from one card to another, are a few examples. So it can be very important to understand the fees associated with different cards.
• Rewards: If you think you will spend frequently, and regularly repay your balance each month, you may want to “cash in” this spending by choosing a card that earns you air mile points or other rewards that are of interest to you personally.
A balance transfer occurs when a cardholder transfers funds from one credit card to another, often to consolidate their debt, avoid paying multiple fees, and simplify managing their debts. Not all cards offer this option, and some do only if the holder pays a fee, so it’s important to inquire about this when applying for a credit card.
Some credit cards are specifically designed for consumers with poor, little, or no credit history. These are perfect for people who have a bad credit rating because they allow you to build up a positive credit history if you repay your balance on time each month.
Regular credit cards may not be available to consumers with a bad credit rating, however, or they may only be available at a very low credit limit.
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