How do Payday Loans in South Africa Work? Here’s What to Know

August 08, 2019

Any South African consumer would be happy to know if their credit debt has improved. However, having slightly less debt doesn’t mean that it is any easier to overcome. If in any case, you find yourself in need of financial assistance right away, one option you may be looking into is payday loans.

The average consumer should try their best to avoid loans if they don’t intend to or cannot pay them off right away. If you have managed to maintain a good credit score and need immediate help financially, however, this article is just for you. Below, we will tell you all about payday loans and how you can apply for one.

Payday Loans – What are they?

Payday loans are what you call unsecured loans. They are mini-financial loans you can take out for a day or even up to six months at a time. When you face an emergency but do not have immediate access to the money needed to cover it, payday loans are a great option. The process of obtaining a loan is also very speedy. In fact, it takes mere hours for you to receive the money! 

If you have a poor credit history and have been unable to take out loans in the past, do not fret! All you have to do is call up a creditor and provide some answers to basic questions. You will also need to provide your bank info and possibly details of your salary. This is just to be sure that you can pay off your debt by the designated time. 

After this short and simple test, you will be notified of the status of your loan. Within a day or two, you should be able to grab the money and cover the financial needs of your emergency. Paying the loan back is also very simple. You can use the same bank account to pay it off!

Payday Loans Range from R500 to R10,000

If you’ve taken out payday loans before and have a history of paying them off, you will get to enjoy an increase in the limit you can borrow at once. It is crucial that you do pay them off within a month or when your paycheck arrives, hence the name payday. Going past the deadline means more fees and interest expenses for you, which can rack up to large amounts if not taken care of in a prompt manner.

An example of fees is as follows:

For the first R1,000, there will be a fee of 16 percent plus 10 percent for any amount above. This will cap at 15 percent of the total loan value plus 15 percent VAT. A 5 percent interest rate will be charged per month. The service fee will be R6,000 plus 15 percent VAT and micro-loans will max at R8,000.

How to Utilize Payday Loans

Payday loans are meant to be used to pay off any emergency, such as a medical bill or an unexpected electricity bill. The loan isn’t meant for you to splurge out over unnecessary purchases. 

This is to reduce the risk of not being able to pay them off within 30 days. The consequences of not being able to meet your commitments are harsh, as interests can be between 0.10 to 0.20 percent per day! If you really cannot pay it off, you can still apply for a six months time frame. Initiation fees and service fees (like the one mentioned above) also need to be paid off. If you do not have the money to pay off the loan, you will only be making life worse for yourself.

Debt, if left unchecked, creates a cycle of you struggling to pay for an ever-growing pile of liability. Remember—the money you end up owing could have been used for essential things. Instead, it is now being used to pay off the costs of interest. Therefore, if you plan ever to use a payday loan, make sure you can pay it back on time.

If you’re looking to apply for a personal loan in South Africa, get in touch with us today to see how we can help.