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Personal Loans vs Car Loans

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Choosing credit can feel like a complex decision considering just how many options are available to you. But understanding how each product can benefit you will have an impact on your approach.

When it comes to many of the loan options available, a personal loan will often factor into the decision making equation, simply because of the flexibility it offers. Here we take a closer look at personal loans and car loans.

What is a personal loan?

A personal loan is generally unsecured credit that is tailored for you based on your personal affordability and credit rating. Loan amounts vary and can be up to R150 000 that can be repaid over a number of years, often up to five or six.

What is the benefit of a personal loan? Arguably one of the most important factors is that personal loans offer flexibility. This means that whatever sum is made available to you, it can be used for any needs you may have. Whether you want to do home renovations, travel the world or simply splash out on some items that you need, this is a credit option to check out.

It is also simple to apply for personal loans online, and if you have a strong credit record it could secure a better deal for you in regards to repayment terms.

What is a car loan?

This is fairly straightforward in that a car loan is credit issued to purchase a vehicle. When looking to buy a new vehicle, your finance is structured based on the cost of the vehicle, the age of the vehicle and your credit profile, amongst other criteria. A deposit for the car may be required as part of the credit arrangement. A car loan is secured and the financial institution will hold the car’s ownership papers until you have paid it off completely.

Interest rates will be determined by your credit profile as well as the credit institution’s risk criteria, and the loan is normally spread over a number of years, which could suit your budget.

If you do take out a car loan you’ll also need insurance that at least covers the outstanding balance of the loan.

When it comes to purchasing a vehicle some credit companies only finance newer models and a personal loan could still be something to consider especially when looking at older model vehicles with lower price tags.

If you need accessories for your new car, a personal loan can come in handy for those added extras too.


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DirectAxis is a business unit of FirstRand Bank Limited, an Authorised Financial Services and Registered Credit Provider, NCRCP20. Direct Axis SA (Pty) Ltd, Reg no. 1995/006077/07, an authorised Financial Services Provider, FSP7249 & FSP5. 108 De Waal Road, Diep River 7800.

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Loan repayment terms range from 24 to 72 months. The maximum interest rate with regards to a DirectAxis Personal Loan is 24.75% per annum (compounded monthly). Your rate and initiation fee will be determined according to your personal risk profile.

An illustrative example of a loan at an interest rate of 24.75% per annum would be: Loan amount R50 000 plus a once-off initiation fee of R1 207.50 and a monthly admin fee of R69.00, over 72 months.

The total cost of the loan will be R 103 718.91 which is a maximum Annual Percentage Rate (APR) of 28.01%.