Our Guide to the Basics of Payday Loans in South Africa

Dec 17, 2020
payday loan

Payday loans are often seen in a bad light since it’s one of the most expensive ways to borrow money. When done right, it can be a silver lining that can cover immediate needs and emergency expenses, but it’s only recommended to borrowers who are confident that they can repay it in full. 

How do Payday Loans Work?

Payday loans are short-term loans that borrowers can pay within 28 days, which means it will take a portion away from your next paycheck. While it can assist you in times of financial peril, the average interest rate for payday loans comes at a steep 391 percent. 

Seeing as there’s only a two-week window to pay it all on time, missing the due date can spike the interest rate by up to a whopping 521 percent. Fortunately, the National Credit Act and National Credit Regulator (NCR) implemented ways to regulate the loans and protect citizens from spiraling into debt. 

Payday Loans Today After the Regulation

Thanks to the regulation, payday loans in South Africa can expect to see a 60 percent average interest rate per annum, which is 5 percent monthly. Keep in mind that borrowers can only ask for a maximum of R8,000. 

While the NCR do their part to assist South African citizens, the nature of payday loans is still questionable and daunting since the process doesn’t involve assessing whether the borrower is capable of repaying the loan. 

Safer Alternatives to Payday Loans 

Seeing as payday loans can be a sketchy choice for unsuspecting borrowers, it helps to consider other safer options such as the following:

Tip #1: Ask an Advance from your Employer 

Payday loans can eat a large portion of your paycheck, so taking the courage to ask for a salary advance is the wiser choice since it doesn’t involve paying extra just to cover for emergencies. 

Tip #2: Seek Consumer Credit Counseling 

If you find yourself starting to drown in debt, then it’s best to nip the problem at its bud by seeking the aid of a debt counselor. Not only can these professionals help improve your financial literacy, but they can even negotiate with creditors to reduce your interest rates or monthly payments. 

The Bottom Line: Understanding How Payday Loans in South Africa Work 

A payday loan can help people in a financial bind, but the window of success is slim due to its demanding nature. You shouldn’t opt for payday loans if you’re planning to use it to cover for other loans, or if you can’t pay it back on time with your next salary. 

How can Hoopla Loans Assist your Financial Needs?

Applying is a loan that can be a time-consuming and complicated process. We can still help take the drudgery away from achieving your financial needs with our smart online application systems at Hoopla Loans. 

If you’re looking to obtain payday loans in South Africa, we’re an ever-evolving online loan broker that can bridge the gap and help you build an impressive credit history. From affordable loans, bad credit loans to emergency loans, we can provide the coverage you need to obtain your goals.