The December that I booked wrong sums, September, and made reservations for four to travel to Cape Town for school holidays. I made the initial payment for my holiday bookings but needed some more money at the end. This would be covered by my bonus at the end of the year; however, it never came. There were several delays in paying out the bonus from the company where I work. I was left short of about a few thousand dollars and I made a bad decision which most people do in such situations – I just picked up any quick loan without going through any fine print.
That was the first mistake. Most experts would just say “Use your credit card for filling this gap,” and many families could do this because it would give a little extra margin, provided their credit card has enough limits for it. But mine didn’t, as the card was used up for the initial payment on my bookings. So I compared a handful of fast loans online at eleven at night. A bad time to be making any sort of decision. I chose the cheapest app, not the one with the most affordable overall repayment terms. That one would cost me more. It cost more in the six week period that I tried to use it.
Why the traditional advice is hard to follow here
The following pieces of traditional advice are given ad nauseam and can work for some people only in some situations. For instance, “create an emergency fund” advice may look fine from theory but does not apply to people whose monthly shortfall is caused by regular pay cycles rather than emergencies. If your payment comes at the end of the month and your expenses on rent, education and mobile credit come right after the 25th of each month, this is not because of your bad luck but just poor timing, repeating every month. No amount of savings will help unless you created a one month cushion. Most families do not.
The second recommendation, to “ask family,” goes well until it fails and it’s not often recognized that doing so will harm your relationship in more ways than borrowing from a formal loan can.
The third, “just wait it out,” fails to recognize that an outstanding insurance payment and a rejection of a debit order come with their own fees which may be greater than the interest charged by a quick bridging loan.
What’s important to understand is that in all of this, before making any kind of loan decision, is conducting the calculation correctly:
- not the advertised monthly percentage rate but the total cost in South African rands of borrowing money
- the presence of an initiation fee in addition to the interest on the loan
- the actual payback day compared with your payday
- the effect if your payday changes again and at some lenders, this is quite possible
- the shorter period plus bigger instalments beats a longer period with higher interest
I go through that list not on my smartphone but on my computer since I realized that I’m more prone to make the wrong choices using the six inch screen than a comparative table in daylight.
The alternative nobody likes mentioning
The alternative, in most cases, is to spend less that week: not getting takeaway, moving non-essential debit orders, waiting another ten days to buy something. Nobody wants to hear it, but it’s free. They do so anyway, because acknowledging the problem means tackling it before it starts. Borrowing money for just two weeks is the second option. If it needs to happen, then at least compare various fast online loans in South Africa, rather than accepting the first one that presents itself.
It’s not about the lender, nor the app rating, that determines which one will suit. It’s about knowing precisely when your next payday falls relative to repayment date, as that’s what will make one bridging loan into the second.
