City of Cape Town to take out R1.4bn loan... and ratepayers may have to pay it back

Checking your Loan Options will not affect your credit score. One major advantage to credit cards is sign-up promotions. You should avoid personal loans that compute interest this way. The creditor may check your debt-to-income DTI ratiocredit score and credit history. Read Less Loan approval and actual loan terms depend on your ability to meet our standard credit criteria including credit history, income and debts and the availability of collateral. However in most cases, if your debt-to-income ratio is too high, you could be denied a bank loan.

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Shop at multiple lenders and pick the loan with the lowest rate for a given loan term. Most online lenders run a soft credit check to estimate your rate, so your credit score won’t take a hit. If you decide to take out a loan, make sure you understand who is making the loan and the terms and conditions of the loan. Student loans can come from the federal government or from private sources such as a bank or financial institution. You can get a personal loan from a bank, credit union or online lender. Your credit score largely determines where you'll qualify and the rate you'll receive.

When a personal loan might not be the answer

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Other lenders may let you pick a payment due date or forgive an occasional late fee. The flexibility to reschedule a payment, though, might keep you from missing a payment and incurring a late fee as well as a hit to your credit score. Some lenders may make loans only for specific purposes. Payoff , for example, seeks only customers who want to consolidate their credit card debt. NerdWallet adheres to strict standards of editorial integrity to help you make decisions with confidence.

Some of the products we feature are from partners. We adhere to strict standards of editorial integrity. Some of the products we feature are from our partners.

Ilene Davis, a certified financial planner based in Melbourne, Fla. In fact, one of the only situations in which she would recommend clients use them is for a bridge loan in which the client will only need the money for a short period and has the resources to pay it back quickly.

This only makes sense if you have excellent credit and can repay the loan back quickly. Also, Rosa said he has seen people take out personal loans to pay for medical procedures. A personal loan can be a great way to manage your debt or afford purchases.

But weigh your options carefully. Taking on debt is a long-term decision — and you may have other options to consider. Nolte said that despite the common lore that you should never borrow against your k , it might be the last resort for young people whose only savings are in their retirement accounts. Rather than going to other sources that are going to charge you a lot more interest, a lot of times it makes sense to use your existing assets if you can. Sallie Mullins Thompson, a certified public accountant and financial planner based in New York City, said that although taking out a k loan is fine, people have to be extremely careful that they follow the guidelines set in place for paying it back.

Adi has also recommended that his clients take out k loans in the past. Further, an online lender or member-owned credit union may be able to offer more competitive rates. You might be able to secure a better personal loan interest rate through a credit union. Adi said he often advises his clients to look for personal loans at credit unions or even local banks because they tend to have better rates than larger institutions.

Nolte said he advises his clients to look for personal loans at credit unions, too. And while credit unions used to have strict membership requirements to join, they may be more lenient nowadays, Nolte added.

But if you find lenders that require a hard credit check each time you request a quote, that could hurt your score. Regular on-time payment on a personal loan can boost your credit score, as it shows that you responsibly manage and pay back your debt.

One thing to be cautious of is taking out a personal loan for credit card debt consolidation , and then closing old credit cards. Rosa said consumers will often take out a personal loan and then close all their credit cards because they feel like they need a fresh start. When shopping for a personal loan, there are a few common pitfalls you should avoid.

When considering whether to take out a personal loan, your financial habits, credit score and need for the money should all be taken into consideration. In general, personal loans can be a good idea for consumers with excellent credit. Make sure you know the interest rate before you take on a personal loan. Nelson said he feels similarly. You can get the personal loan, pay off your credit card debt and then you have an issue with paying off the personal loan.

If her clients do take out personal loans, Thompson said she spends ample time educating them about personal finance. But if you have the right discipline in place, a personal loan can be a good financial decision. Jamie Friedlander is a writer at MagnifyMoney. You can email Jamie here. Kristina Byas is a writer based in Milwaukee, WI.

Add an emergency into the mix and you may be looking for some financial help. You may be weighing between a pawnshop loan and a personal loan, but these two products have some key differences. If you want a pawnshop loan, you have to bring in an item to use as collateral. The pawnshop will evaluate and appraise the item to determine the loan amount for which you qualify.

Pawnbrokers will also consider their ability to sell the item. But the value of your collateral and your state will determine the maximum amount of money you can borrow. You can expect a pawnshop loan to be for up to half the value of your collateral. If you fail to repay your loan, your collateral will be seized and sold. When it comes to interest and fees, pawnbrokers are a far pricier option compared to personal loans.

But pawnshops are regulated by the state in which they are located, so the interest rates and fees will vary. As a rule of thumb, you should avoid pawnshop loans.

Their high rates and fees mean you pay a high cost for a small amount of money. A pawnshop loan may be easy to qualify for, but it comes with a lot of risks. Between high rates and fees and the potential to lose your collateral, a pawnshop loan can leave you in worse shape than you started. You have various options for managing your money. But be wary of pawnshop loans. A personal loan may be a safer choice. Kristina Byas is a writer at MagnifyMoney.

You can email Kristina here. Gordon is a freelance writer, Certified Financial Education Instructor, and founder of Tay Talks Money, a money management blog that helps millennials, free-spirits, and creatives master their money. When you need to borrow money, you may think to borrow a personal loan or get a credit card or home equity line of credit HELOC. What can a personal line of credit be used for?

A personal line of credit is a loan you can use and pay back as needed. The terms of the product can vary from one lender to another. In most cases, personal lines of credit come with variable interest rates. But they can come with a fixed interest rate. Aside from the interest rate, personal lines of credit may have other costs. Take care to read through the fine print of the terms for these potential fees:.

Credit limits for personal lines of credit can vary. A secured personal line of credit, on the other hand, requires collateral and may be backed by the balance in a savings account, certificate of deposit or investment account. Collateral reduces the risk for the financial institution lending you money. As a result, secured personal lines of credit generally have lower interest rates.

But a secured line of credit comes with a higher risk to you. If you fail to repay your debt, you could lose your collateral. And you may not have access to the collateral you use to secure the credit line until the debt is repaid. Personal lines of credit are marketed less widely than other products, but there are several available from small and large banks and credit unions. The first place to shop for a personal line of credit is the financial institution you use for banking.

Some banks, such as Citibank, only take applications from existing customers. The requirements to qualify for a personal line of credit vary from one lender to the next. Some financial institutions may not require you to have a checking account to qualify for a personal line of the credit. Be sure to comparison shop to find a personal line of credit that makes sense for you. The creditor may check your debt-to-income DTI ratio , credit score and credit history.

You may have to turn in pay stubs, W-2s, tax documents and other supporting information for the application. If you already have accounts with the financial institution, it may also dig into the history to see if you have any overdrafts or other signs of misuse that could impact their decision.

Once approved, you get the terms of the agreement to sign at a local branch or online. You will likely get access to the funds within a few days. Some personal lines of credit give you a draw period that lasts a couple of years.

During this draw period, you can draw up to the credit limit. After the draw period, the repayment term begins, and you need to pay the money back. A monthly minimum payment is typically required. Additional fees may apply. Some personal lines of credit offer an interest-only payment option. Be careful about getting into the low-cost, interest-only payment trap.

Making interest-only payments can lead to much larger payments down the line when you need to start repaying principal and interest. You have the freedom to choose how you use a personal line of credit.

You could pay for home repairs, education expenses, unexpected bills or debt consolidation. The benefit of a personal line of credit is that it can cover unpredictable costs. In comparison, a personal loan gives you a set amount of money with a set repayment period. Personal lines of credit are generally for borrowers who have at least decent credit with some savings socked away. A solid credit history and savings could qualify you for the best rates and avoid the need for you to put up collateral.

The products above are tailored to high-net-worth clients. Borrowers without six figures in the bank may still be able to qualify for a personal line of credit, but the rate and terms may be less competitive. Compare financial institutions to find which one benefits you the most. A personal loan is an installment loan. You can use the funds from a personal loan for a variety of reasons, from car repairs to medical procedures to weddings. Consolidating debt is a popular reason for taking out a personal loan.

These loans can offer a low fixed interest rate on a fixed term. You can apply for personal loans online through banks, credit unions and online lenders. Each will consider your credit, income and other variables to determine your eligibility for a loan. Personal loans are a product for almost anyone. There are personal loans available for people with stellar credit, as well as those who have less-than-perfect credit.

The best interest rates are usually given to borrowers with good to excellent credit scores — generally and above. The good news is you can shop for personal loans to check rates without a hard inquiry for most lenders. Be sure to ask about introductory rate expirations and rate caps to get a clear picture of costs. HELOCs are offered through banks, credit unions and other lenders.

You may be able to borrow up to 80 percent to 90 percent of your home equity value. That could be a perk if you need to settle other obligations. You may be able to renew the credit line after the draw period ends. HELOCs may have closing costs, annual fees and prepayment penalties. Take care to read the interest rate and fee terms to avoid any surprises. A HELOC is going to be best for borrowers who have sufficient equity in their home and decent credit.

You may need a credit score of at least to qualify. A score of or above could make it easier to get approved. Like a personal line of credit, a HELOC is a product for borrowers who have a history managing available credit responsibly.

If you fail to repay your debt, you could lose your house. MagnifyMoney is owned by LendingTree. A credit card is a line of credit you can use on the fly. Some credit cards also offer rewards for transactions. You could, for instance, get cash back or earn miles toward free flights with a credit card.

You can apply for credit cards online within a few minutes. Your financial information will be taken into account, including your credit history. If approved, the credit card issuer will provide you with a variable interest rate, spending limit, and any other fees associated with the card offer.

A minimum payment is due each month on your account. Over time, your rate can rise or fall. Depending on the card for which you apply, you may be responsible for paying an annual fee. Expect to pay fees for late payments and cash advances as well.

You can find credit cards for bad credit , but the best rewards programs and rates are reserved for those with excellent scores. One major advantage to credit cards is sign-up promotions. Some cards offer a cash reward or bonus miles for signing up. Pay off your balance within that promotional period, and you essentially had a no-interest loan. Credit cards are best for borrowers who are committed to using plastic and paying it off each month.

A personal line of credit has its merits. But you should weigh your options carefully. Ultimately, the right product for you will depend on your goals and financial situation. The best way to find the most competitive product for your needs is by shopping around and considering which products and features matter most to you.

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor here. Holly Johnson is an award-winning writer who is obsessed with frugality, budgeting, and travel. There are many reasons homeowners choose to replace their existing air conditioning or HVAC unit, including a desire for greater energy efficiency or better functionality.

For a smaller-sized home — less than 1, square feet in this example — you would pay considerably less, however. With these costs in mind, you may be wondering about the best ways to pay for a new HVAC system. Should you save up the cash or pull from your emergency fund? Or, would financing with a credit card or personal loan leave you better off?

At the end of the day, the right way to pay for a new HVAC system depends on your goals and your personal finances. Consider these loan and financing options as you move forward with your research. A credit card can be a valuable tool when used with careful thought and consideration. Some consumers who have the cash to pay for their HVAC unit in full may choose to use credit for additional reasons such as earning cash back or travel rewards.

While it could be smart to use a credit card to pay for an HVAC unit, there are several pitfalls to watch out for. You can compare credit card offers right here on MagnifyMoney. A personal loan is another option you can use to finance an HVAC system. This financial product offers many benefits that can be advantageous if you need some time to pay for your HVAC unit, including fixed interest rates, a fixed repayment schedule and a fixed monthly payment.

Depending on your credit score, a personal loan may also offer a lower interest rate than you might receive with a credit card or other types of financing. With that in mind, you should compare offers to find personal loans with the lowest interest rate and lowest fees or no fees. Finally, make sure your personal loan comes with a monthly payment and repayment timeline you can live with.

To compare loans and estimate the costs of borrowing, you can browse here. A home equity loan works similarly to a personal loan in the fact that both offer fixed interest rates, fixed monthly payments and a fixed repayment timeline. However, personal loans are unsecured loans, whereas home equity loans are secured by the equity in your home. Another option is a home equity line of credit HELOC , which is a revolving line of credit secured by your home. HELOCs have variable interest rates, and you only pay interest on the amount you borrow, so your monthly payments will vary.

Home equity Loan here! For this reason, this option may not work for you unless you have considerable equity in your property. On a positive note, the interest rate you can qualify for may be lower than other financial products because the loan is secured by the value of your home.

The interest you pay on your home equity loan may also be tax-deductible. Before you apply for a home equity loan, make sure you understand both the advantages and any potential pitfalls. The FTC also suggests comparing several loan offers to ensure each lender or broker is competing for your business with the best loan terms possible. Fortunately, you can compare home equity loans online with our parent company, LendingTree.

Because some consumers need to borrow money to purchase a HVAC system, many companies that manufacture and install HVAC units offer their own financing plans.

In most cases, they partner with a lender to offer in-house loans. While financing your HVAC system through the company you purchase it from may sound convenient, there are several potential downsides. You can also research HVAC companies that offer in-house financing online. Since HVAC vendors use different banks to fund their consumer loans, the terms of these offers can vary widely.

A quick internet search can pull up a treasure trove of information that can help you compare loan and financing offers to find the best deal. Several factors make up your credit score, including ones that can be impacted when you make a large purchase.

As a result, you may see an impact to your credit score if you open a new credit account to pay for your HVAC system. Holly Johnson is a writer at MagnifyMoney. You can email Holly here. Laura Woods is a Los Angeles-based freelance writer with more than 10 years of experience in business and personal finance.

If you need some extra cash or want to pay off debt, taking out a personal loan can be a smart way to get the money you need. Personal loan interest rates can be lower than credit cards if you have decent credit and a personal loan can help you raise your credit score. In addition, there are dozens of online lenders to choose from, some of which offer an easy application process and funding in just one business day.

Along with the pros, of course, come cons. Find out how to protect yourself from falling victim to fraud. Where to find the best personal loans online. Genaway, a financial advisor from Pittsburgh, Penn. Traditionally, when you want a personal loan, you seek out a lender. Scammers, however, often turn the tables by approaching consumers with bogus offers. If you have no credit or a less-than-stellar credit score, a personal loan with a guaranteed approval is bound to catch your eye.

Legitimate lenders never promise your application will be approved. Extending a personal loan is a risk, so trustworthy lenders always review background information on consumers before offering money.

If you have poor credit, check out list of the best personal loans for bad credit here. When you take out a personal loan, you should be the one receiving the funds. You should never make payments for a loan directly to an individual, according to the FTC. Beware if the lender loans money to those with a poor credit histories, Genaway said. It might not be what you want to hear, but legitimate lenders typically verify credit information prior to approving a loan. Legitimate lenders are open and honest about any fees associated with your loan.

Application, appraisal and credit report fees are standard, but the lender usually deducts the fees from the amount you borrow. Jeffrey Brown, a financial advisor in the St. Louis area, said applying for a personal loan online is common practice these days, but he advises consumers to do it the right way. Genaway agreed that applying for a personal loan online is generally safe, thanks to technology advances. Consumers can identify potentially fraudulent websites a couple different ways, according to Genaway.

Speaking up promptly can help authorities catch the scammer quickly. Shopping around is the key to locating the best personal loans online. LendingTree, which owns MagnifyMoney, has a personal loan comparison tool that connects dozens of reputable lenders with consumers in need of financing.

Asked why the city council needed a loan and why it could not use its own capital funding for the upgrades, Van der Merwe said: All cost implications have been considered in terms of affordability in advance.

Schussler said although infrastructure upgrades are needed, the current recession means Cape Town needs to fork out more to repay the loan. At the end of the day, ratepayers are the main income for the city and already many municipalities are in debt.

Schussler said a recession could lead to job losses and weaker economic activity. Despite a so-called culture of non-payment, many consumers cannot afford their payments to councils. Mayco member for informal settlements, water and waste services and energy Xanthea Limberg said the city council pre-empts upgrades to critical infrastructure.

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