Are you thinking of applying for a South African personal loan? Before you do, spend just a few minutes reading this guide as it could help you avoid some of the pitfalls and potentially access the best possible deal. So, what should you do and not do to make sure the loan you apply for is the right fit for you?

Do: Find out how long it’ll take for the money to arrive in your account

These days, many of the loans South African consumers apply for are so-called short-term loans. There are a number of providers of this type of loan. For example, the South African lender Wonga offers loan terms as short as just one month with a maximum loan amount of around R4,000. This type of loan is designed to help people pay for unexpected expenses they hadn’t necessarily bargained for. Speed is the essence of this type of loan, so it’s essential the cash is in your account quickly.

With some lenders, it can take up to 10 working days for the loan amount to arrive in your account. That’s not going to be quick enough if there’s an urgent cost you have to meet. This is often the case for loans backed by banks or building societies. Somewhere in the small print, whether it’s online or on paper, it will tell you how long it will take for the funds to reach your account. Make sure you check this before you complete the loan application.

Don’t: Rely on price match guarantees

Some lenders promise to match any other rate of interest you find within 30 days of taking out a loan. That might look great at first glance, but the small print is likely to require you to have proof of the competing offer, which means you’ll also have to apply for the second loan. While you can simply withdraw the application for the second loan once the price match guarantee has been honoured, what you’re left with is two loan applications on your credit history. Applying for two loans in such quick succession is likely to be a red flag on your credit record which could impact your ability to access credit in the future.

Do: Perform a ‘soft search’

All lenders will have an advertised headline rate in the form of an APR. However, that APR, or annual percentage rate, is not necessarily the rate you will receive. 51 percent of eligible customers who apply for a loan must receive the headline rate, but that leaves 49 percent who may not. For that reason, shopping around alone doesn’t necessarily guarantee you the best APR. In fact, research has found that 61 percent of loan providers do not give borrowers their final, personalised interest rate until they’ve performed what is known as a ‘hard’ credit check.

A soft search lets you check what loans your eligible for and what APR you will receive based on the loan amount, the repayment term and your credit history, without impacting on your credit score. Although this type of search gives you no guarantees that you’ll be accepted for the loan until you actually apply, it does give you a good idea of the loans you stand the best chance of obtaining.

Don’t: Assume you can overpay on a loan

Personal loans, even those offered on a fixed-term basis, can still offer an element of flexibility in the form of overpayments without paying additional charges. However, you should never assume that a loan will allow you to make overpayments on a loan. Some lenders will add additional charges for loan overpayments, so make sure you check the small print carefully before you apply.

Do you have any personal loan tips to share with our readers? Please leave your thoughts in the comments below.