What option do you have when you need a loan

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It depends. You need a small loan for a short period of time. A personal loan is likely to have the lowest interest rate and fees of these 3 options, but these lenders aren’t really looking to loan small amounts for short periods of time

Pawning

Pawning something you own can work, but for you to get R2000 from the pawnshop, the item you pawn might need to be worth R5,200-R6,500. You’ll pay a high rate of interest, a ticket fee, and often a storage and handling fee. The maximum interest rate charged varies by state, from a low of 30% to a high of 300%. The loan term also varies by state but is typically between 1 and 4 months.

Payday loans are regulated

Payday loans are also regulated by the states. According to the PEW charitable trusts, “Payday loans are available in 36 states, with annual percentage rates averaging 391%. The other states effectively prohibit these loans by capping rates at a low level or enforcing other laws.”

Personal loans have lower rates

A personal loan should have a lower interest rate and fees associated with it than either the pawnshop loan or the payday loan.

Personal loans typically don’t have prepayment penalties, so you aren’t penalized for paying off the loan early.

The peer-to-peer lenders will quote you an interest rate without affecting your credit score. The issue with the personal lenders is that you’re looking to borrow only R2000, which is far below most lenders’ minimum loan amounts.

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