Personal loans are one of the most popular forms of credit in South Africa and are branded and marketed in various ways.
Technically speaking, almost all forms of credit apart from home loans, credit cards and business loans are a form of personal loan - this includes fast cash loans, payday loans, bad credit loans, debt consolidation and vehicle loans.
They can range from as little as R200 to as much as R300,000 and can be obtained from a range of financial services providers including banks, retailers, peer-to-peer lenders and online credit providers.
Most lenders offer an online loan application and it can take anything from 24 hours to a week to process the application and get you approved. We have collated and gathered the most important details on a variety of credit providers who offer personal loans and these are conveniently listed below.
Secured vs Unsecured Personal Loans
Secured loans are those which require the borrower to provide security in the form of an item of value, their home or their vehicle. Vehicle loans are a form of secured loan since the vehicle you are purchasing will be used as security and should the borrower not make the agreed repayments the lender will have the car repossessed to recover their money.
If you have bad credit chances are that you will only be able to secure a loan if you can provide security in the form of a property. Unsecured loans are loans that require no security but, will have you paying a higher interest rate than you would on a secured loan. People that have good credit can, however, get an unsecured loan from any of the major banks in the country and any alternative credit provider.
Where you can get a Personal Loan
As already mentioned there are a variety of credit providers that offer personal loans and it is up to you to decide which lender meets your particular needs more precisely. Your bank is likely to be the first lender that you approach when you need a quick loan and this is a good thing. Banks typically offer the most competitive personal loan products with large loan amounts, flexible loan terms and low interest rates that are tailored to your unique credit profile.
Most South African banks will likely offer you an unsecured loan if you have good credit- which means you do not need to put your home up as security to secure the credit. If you have poor credit or have been refused a personal loan at your local bank you may want to consider an alternative credit provider such as a peer-to-peer lender or an online lender.
These lenders have slightly less stringent loan application requirements and are likely to approve you even with an adverse credit history. To find out where you can get a personal loan, consult our comprehensive list of South African personal loan providers below.
Important Considerations when Taking out a Personal Loan
One of the features of a personal loan that most people get fixated on is the interest rate offered but, sadly this isn't necessarily the best way to compare loans since many lenders do not include fees and additional costs when working out the interest rate they use to advertise their loans.
To compare loan rates accurately you should always look for the Annual Percentage Rate (APR) which should take into account the interest in addition to all the fees that you will incur over a period of 12 months.
It's also important to find out what the lenders policy is on early and late repayment - so that you know what to expect should you want to repay the loan early or if you miss a payment. If you're looking for a short term loan many of these aspects will not be as important however, being aware of them will ensure you don’t end up paying more than you should.
Qualifying for a Personal Loan
The qualification requirements for personal loan vary wildly depending on the lender you use and on what type of loan you're applying for. The basic application requirements that are applicable to all South African lenders are: that the applicant is over 18 (in some cases 21 or 22), that they are South African citizens or permanent residents and that they are employed or self employed and earning a stable income.
If you're applying for a small loan the requirements will be less stringent than those for a large loan. Major lenders will require that you have a good credit history and that you have sufficient disposable income after all of your monthly debts and expenses are paid to make your loan repayments.
Paying off a Personal Loan Early
Even with most companies charging penalty fees for repaying your personal loans early, you could still save hundreds of Rands by repaying early. The first step is to check your personal loan agreement and see what the penalty for early repayment is.
Then you need to calculate how much you can afford to repay by evaluating your budget and your savings. You will need to provide your lender with a notice indicating your intention to overpay before you do so.
Once you've notified the lender you can then make the desired overpayments every month. It may be helpful to note that lenders are required by law to allow you to make extra repayments which means that when it comes to repaying debt early - the law is on your side!
If you're not going to repay more than the over payment limit (which should be listed on your loan agreement), there is absolutely nothing to worry about and you should certainly go ahead and overpay!
For payments made over the indicated over payment limit; you need to be able to work out how much money you're going to be saving in the form of interest by overpaying a certain amount and compare that to how much you're going to be charged for that overpayment.
Is it Worth it to Pay Early?
In almost all cases you will be saving money by making those additional repayments and this, is a much greater return than one you would get by stashing that money into a savings account. The reason? Simply because the interest you're paying the bank on a loan will always be higher than the interest rate they offer you for saving money.
In certain cases repaying debt off early makes sense - you will save money and get out of debt faster. This is something that most people dream of - paying off debts and saving and investing additional income instead but, what you should know is that the bigger the loan the less these overpayments are going to count and, paying off debt early will not have a positive effect on your credit score either.
On the other hand, repaying debts early cannot bring your credit score down either. If you're worried about your credit score then credit card debt and car loan debt should, if at all possible, not be overpaid since this will reduce your utilization ratio and lower your credit score.