LOANS: THE REAL COST

Updated: Oct 5, 2018

It’s been a bruising first half of 2018 for consumer pockets - the vat increase to 15% and hefty increases in the fuel price are already impacting the cost of food and transport, and SA’s dismal economic growth figures have many of us concerned about the increased costs of living in the months ahead.  Chances are all these factors will see a hike in inflation, which means the cost of everything is going up – except your salary!  

By: Nkazi Sokhulu


With July touted as savings month, use the opportunity to cut back on unnecessary costs as far as possible – the obvious areas to cut back on are luxury items, entertainment and the like, but did you know that an overlooked area of reigning in spending is the hidden costs associated with your personal loan?


You may think that these monthly repayments are fixed, but significant savings can be realised on the cost of the credit life insurance which most banks make mandatory when taking out a personal loan. If you currently have a personal loan, you will have credit life insurance, which banks require as security for your debt should you become unable to service your loan repayments due primarily to death, disability or retrenchment.  Most likely, you had no idea that you even had this cover, how much its costing you, or that you are not obligated to take it with the bank, as there are much more affordable options that offer better benefits. 

Even on an existing loan, you can switch your credit life insurance to Yalu for lower rates, and better benefits without any repercussions to your loan as long as there is no break in cover. New credit life insurance regulations came into force in August 2017, capping credit life insurance to R4,50 per R1000 loaned, and to make it permissable for the consumer to select their own preferred credit life provider rather then the bank’s, as well as to switch, should you find a product that better meets your needs. It’s important to note that the capping fees for credit life insurance premiums only applies to new loans, and none of the loan providers have revised their existing credit life premiums downwards for loans granted prior to August 2017. This means that if your loan predates August 2017, you could very easily be paying more than double the new capped rate for your credit life insurance!

uToo many consumers are paying too much towards credit life insurance. Here’s a simple example to illustrate the potential monthly savings you could enjoy with Yalu


On a personal loan of R60 000 with a repayment period of three years:


• Total credit life paid at R3.50 per 1000 over three years: R210/pm x 36 = R7 560 • Total credit life paid at pre-Aug 2017 rate of R8.50 per R1000 over three years: R510/pm x 36 = R18 360 • Difference: R10 800 over 36 months or R300 per month

Switching your credit life cover to more affordable rates and better benefits with Yalu gives you the freedom to use the savings towards paying off your existing loan, and reducing the impact of compound interest on your pocket. As a new digital insurer on the market, Yalu makes credit life insurance smarter, faster, transparent and easier to access.

Yalu Benefits:

• The premium automatically reduces every month as the loan amount reduces.  You only pay for the cover you need to settle your outstanding loan and not a cent more.   • The policy rewards you with 10% of premiums back at the end of the loan term if you have not claimed on the policy. • Its simple: the only credit life insurance policy in the market that can be purchased effortlessly online in under five minutes, and guarantees you coverage for all the benefits that your current insurer provides. • Affordablility and transparency are some of the other benefits; with clearly defined benefits and speedy claims processes.  • One policy covers all personal loan commitments - saving you more money on unnecessary admin fees and debit order costs. 


So, before you think that swopping your existing overpriced credit life cover isn’t worth the hassle, consider what it would mean for your pocket and finances if you could pay the savings on your credit life policy in on your loan repayments instead. When the going gets tough, the tough get going, and that means being diligent about saving and enjoying the cumulative impact of all your cost-cutting measures.

Yalu is a newly launched black owned, black managed digital insurer that offers credit life insurance. Cut out extra costs from you monthly repayments today, visit www.yalu.co.za/ for more information.



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