Secure a bright future with an education loan in South Africa
Getting some form of higher education is always encouraged, especially if you want a better job and a better life. However, it’s not always easy to afford all the costs of going to college or university.
As a result, many South African students are using education loans to continue with their studies. If you wish to be part of this team, and before you get started on your education loan application, we give you the important education loan details you should know.
How does an education loan work in South Africa?
Basically, an education loan is a lump sum of money that you borrow to cover any education-related expenses. The money can cover costs for tuition, accommodation, textbooks, plus more. After borrowing, the next step involves paying back the loan plus interest. Student loans also have the following features:
- The loan can either be in your name or your parent/sponsor’s name;
- In most cases, you only pay interest on the loan while studying. However, when you start working, you repay the rest of the loan.
- If you fail to repay the loan, your co-signer or sponsor will be responsible for these payments.
Can you afford an education loan?
First and foremost, an education loan is not “free” money. Many students graduate only to find out that their loans have become a financial burden. While an education loan might be for a good cause, always make sure you or your sponsor can afford it.
You can apply for a bigger study loan and get approved, but that doesn’t mean you can afford it. To get a better estimate of what’s affordable, look at your monthly repayments and the total cost of the loan. This way, you enter into the loan agreement knowing exactly what you’re getting into.
Comparing education loans with other types of loans
When it comes to paying for your tertiary qualification, education loans are usually the best option. Compared to other common types of loans such as credit cards and personal loans, an education loan offers the following advantages if you’re a student:
Flexible repayment plan
As long as you’re dealing with school, lenders will only ask you to make monthly payments on your interest. Depending on how much you borrow, this amount is usually an affordable payment. In addition, after graduation, you’ll also get a grace period of up to 1 year so you can look for a job without making any repayments. After this, you start repaying the rest of the loan.
Lower interest rates
An education loan offers relatively lower interest rates that can start from as low as 10.5%. On average, personal loans usually start at 15%. However, keep in mind that education loans usually have longer loan terms so you might end up paying more in interest. The easiest way to get a cheap education loan is to pay it off as quickly as possible.
Security
Student loans are unsecured. Some parents use home equity loans or secured personal loans to pay for their children’s education. That means if the study loan is not repaid, there is a risk of losing the house or asset. This makes student loans safer and easier to apply for since no security is required.
7 questions to ask yourself before starting the education loan process
- How much do I owe? – It’s usually necessary to apply for an education loan for every year of study. If you already have debt, calculate the total amount you owe. This helps you to choose a loan amount you can afford since you don’t want to have too much debt.
- What is the interest rate? – While education loans have lower interest rates, do your research and find a lender with the lowest rates. If you check our comparison tables above, this information is available for each lender.
- Are there any extra fees? – While comparing our featured lenders, you can click “View fees and additional info.” This information shows you any extra fees and charges that are added to the loan besides interest.
- What are the monthly payments? – This depends on the loan amount and the loan term. Use our education loan repayment calculator to find the estimated monthly repayment amount for various loans.
- What is the total cost of the loan? – This is easy to figure out once you know the monthly repayment amount and the loan term. Multiply the two and add any upfront fees to get a good idea of how much the loan will cost you.
- Which loan has the best features overall? – Compare different education loans and find the best one by looking at any extra features. These include the available repayment plans, loan amounts, loan terms, and whether you can make early repayments at no extra cost.
- How much can you afford? – It helps to look at your expected salary after graduating. This way you can decide if the loan you’re currently applying for is something you can afford.
What do you need to apply?
- Valid South African ID;
- Minimum of 18 years;
- You must provide proof of registration from a South African tertiary institution;
- Examination results from the South African Department of Education (in some cases);
- An invoice that shows tuition fees and accommodation and textbook costs; and
- Proof of income (if the loan is in your sponsor’s name).
How to apply for an education loan
The education loan process for online applications at CompareLoans involves scrolling to the comparison tables above. Next, press the“Go to Site” button that matches the lender you want. This link takes you to their website where you can begin the online application process. You might have to open a student loan account and provide important information such as whether you’re studying part-time or full-time and the number of study years you’re applying for.
Avoid these mistakes when taking out an education loan
- Don’t take out a loan without verifying your ability to pay it back. Use the information outlined in this article and the repayment calculator to borrow responsibly.
- The study loan should not be used for any cost that is not related to your education.
- If you’re not in desperate need of this type of loan, it might be best to avoid applying for one.
- Never rush to take out the loan without making some comparisons. A lot of South African lenders offer affordable and authorised financial services. You need to find as many education loan details as possible to get the best loan.
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