Benefits of Short-Term Loans Relative to Other Loan Types

With households and small businesses feeling the pinch, more and more South Africans are turning to readily available sources of credit to see them through.

One example is short-term loans. These are loans that require repayment within a short period, most often 30 days.

It’s true that spiralling debt is a significant problem in South Africa. However, it’s equally true that credit plays an important role in helping people meet unexpected costs or stretch resources to month end – and traditional bank loans aren’t always the best option.

Pros and cons of short-term loans

Generally, advantages of short-term loans are that:

• they’re much easier to obtain than bank loans
• you don’t need a spotless credit record
• you can get the funds you need almost straight away
• often repayment terms are flexible.

Banks also offer short-term loans, but these are granted only on condition that you meet certain credit requirements and generally take longer to obtain than other short-term loans.

Depending on the type of loan and the nature of the agreement that’s involved, potential disadvantages of short-term loans include high interest rates and excessive penalties for late payments. There’s also no shortage of unscrupulous lenders in South Africa.

Popular types of short-term loans

In South Africa, many types of short-term loans are available. Among the most popular are “pay-day” loans and asset-based loans.

Pay-day loans

A pay-day loan is a small cash loan that usually has to be repaid when you receive your next pay cheque, although some lenders offer longer repayment periods.

A downside to pay-day loans is that they often come with exorbitant interest rates and high penalty fees if you don’t make repayments on time.

Asset-based loans

In the case of an asset-based loan, you offer an asset as collateral. The value of the asset determines the value of the loan. Once you’ve repaid the loan with the agreed interest, the asset is returned to you.

Significant advantages of an asset-based loan are that:

• the loan won’t affect your credit record in any way
• funds are usually available almost immediately
• you don’t have to consider selling a precious asset to raise funds
• if you can’t repay the loan, you don’t risk losing your other assets.

Why choose Lamna for a short-term, asset-based loan?

Lamna is an accredited speciality finance company, offering short-term loans based on the value of the assets supplied as collateral.

We treat every loan in the strictest confidence. Our interest rates comply with the National Credit Act. We don’t perform credit checks and in most cases, you can access the funds you need on the same day you apply.

For more information about using an asset to secure a short-term loan, contact us on 086 111 2866 or simply complete and submit our online application form.