Many people misunderstand loans – they assume that because loans involve fees and interest, they’re automatically a bad money choice. They see any borrowing as evidence that you’re managing your finances poorly.

But this is a very limited view that doesn’t consider the many benefits that responsible loan use can bring. Consider home loans and vehicle finance – borrowing is essential to most of us when we want to buy a home or a car and investing in physical assets is seen as a good money choice.

A loan makes financial sense when the benefits it brings outweigh the cost, and a manageable, affordable, cost-effective personal loan can be the most responsible financial option in several scenarios.

Weighing up personal loan benefits against the cost

When you need extra money to finance an important personal need, cover an unexpected expense or consolidate multiple loans that you have into one affordable payment, a personal loan can be the better money choice. 

A loan is neither good nor bad in itself, but how you manage it determines if it is a good money choice. That’s why at Nedbank, we reward responsible borrowing to encourage clients to manage their loans well.

How do we reward responsible borrowers?

Being a responsible borrower means paying your debt consistently on time and in full every month. It’s the best thing you can do for your financial future, as it helps you maintain a healthy credit profile so that you continue to enjoy access to credit, potentially at a lower interest rate. 

With Greenbacks, we can help you make better money choices through the Responsible Borrower rewards package. Every 3 months you stand a chance to win the balance of your loan by simply paying your vehicle, home, or personal loan instalment on time and in full every month.

You could win up to R1.5 million on a home loan and a vehicle loan, and up to R300,000 on a personal loan. If you have more than one qualifying loan with us, you will receive one automatic entry into the draw for each eligible loan type. So, if you have both a home loan and a personal loan with us, for example, you will get 2 entries.

To join the Responsible Borrower package and qualify for the quarterly draw, you need to do the following:

• Join Greenbacks on the Nedbank Money app or Online Banking if you haven’t already, and opt in to the free Greenbacks Responsible Borrower package.
  
  
• Set up a debit order on your salary account to pay your personal, home or vehicle loan instalments automatically every month – or else, make sure you make every manual payment in full and on time.
  
  
• Ensure there is enough money in your account every month to cover your debit orders, so you never miss a payment.

For more information, see the Greenbacks Responsible Borrower package terms and conditions.

Apart from the chance to win the balance of your loan, signing up for Greenbacks rewards and the Responsible Borrower package has several other benefits.

You get access to exclusive partner deals, coupons, vouchers and competition entries. And you can support the worthy causes you feel passionate about through the Nedbank Affinity programme, at no cost to you.

Stay on top of your credit score

Being a responsible borrower and managing your loans properly is a good way to keep your credit score healthy. And because a good credit score is one of the major factors a bank considers when you apply for any kind of loan, managing your loans well can help you qualify for more credit in the future and receive better interest rates.

It’s a good money choice to check your credit score once a month, and we have a handy tool to make that simple, whether you bank with Nedbank or not. If you notice a sudden drop in your credit score, it’s important to find out why. It could be caused by you taking on too much new debt, or missing a payment, and it’s easier to rebuild your credit score if you know which habits to avoid in future.

Or your score might have dropped simply because of an error that resulted in an incorrect ‘missed payment’ notification to a credit bureau, which you can fix by providing proof of payment to that bureau. Remember that your bank doesn’t set your credit score – the credit bureaus do, so they are also responsible for fixing any errors and you should approach them directly.

That’s another reason to check your score every month, and here’s one more: in a worst-case scenario, your credit score might have dropped because you’ve been a victim of online fraud or identity theft. It’s vital that you block or cancel any cards or accounts that have been compromised as soon as possible.

A loan should be tailored to your needs

Affordability is another key factor that a bank considers before approving a loan application, so it’s clearly a better money choice to apply for a loan with a bank that can tailor your loan to be affordable to you. That depends on how well your bank ‘knows’ you, financially speaking. 

If you’re a Nedbank client and your salary is deposited into a Nedbank account every month, we have a good idea of what kind of loan you can afford based on your financial history. We know what you earn, what debts and expenses you need to pay every month, and how much is left over as disposable income. Once we have completed your FICA check, there is no need to keep resubmitting documents every time you apply for a loan.

If you’re a long-term client who has consistently shown responsible borrowing habits, you may qualify – or even be selected – for a loan offer just for you. Or if you apply for a loan that’s unaffordable, we can offer you different solutions – if a smaller loan really won’t cover your needs, we may be able to approve a loan for the required amount over a longer term, so the monthly payments will be smaller.

If you pay attention to the trio of responsible borrowing, monitoring your credit score and getting the terms tailored to your needs, a personal loan can indeed be a better money choice. It allows you to pay for what you need when you need it, and provided you manage it well, can help you qualify for more credit options in the future.

Did you know that if you take out a personal loan and open a Nedbank Savvy Plus or Savvy Bundle Account, you can get R200 a month cash back for the duration of your loan? For an affordable loan tailored to your circumstances and value-added extras like cash back, choose the bank that’s best for your money.