Minimum and maximum loan periods vary between 1 months and 6 months. Percentage Rates vary between 5% per month and 38% p.a. Total interest and fee repayments vary over the life of the loan. All rates quoted are 30 days. For more information regarding fees, visit or contact the provider.
Short-term & payday loans in South Africa: An A-Z guide
There is nothing more attractive than an offer for some quick, fast cash, especially when you’re broke in the middle of the month. But, are you well-informed about how the process works? Payday loans can indeed deliver you from stressful financial difficulties.
As much as you try to budget and keep ahead of expenses, unexpected things happen. It could be an emergency trip to the hospital that leaves you with an unforeseen medical bill. Or, perhaps your car breaks down, leaving you stuck.
You may be able to see your payday on the horizon, but your emergency simply can’t wait until then. During these times, what you need is short-term relief to cushion you until your payday finally shows up. However, borrowing money in the form of payday loans needs a careful and knowledgeable approach, so you know what you’re getting into.
This is where CompareLoans comes in.
What will you learn in this guide to payday loans in South Africa
In this in-depth article, CompareLoans gives you some much-needed insight into:
- A quick overview of payday loans
- What is a payday loan?
- How do payday loans work?
- Popular features of payday loans
- Payday loans vs. short-term loans
- Benefits of payday loans
- Risks associated with payday loans
- The best time to take out a payday loan
- Uses for payday loans
- Where can you get a payday loan in South Africa?
- Calculating the total costs for a payday loan
- How to pay back a payday loan
- What you need to apply for short term and payday loans
- Comparing different payday loans in South Africa
- What you should know before applying for a payday loan
- How to apply for short term and payday loans
- Frequently asked questions about payday loans
Quick notes on payday loans
- Minimum loan amounts: R100
- Maximum loan amounts: R8,000
- Minimum loan term: 1 day
- Maximum loan term: 6 months
- Initiation fee: 16.5% for the first R1,000 you borrow. After that, it’s 10%.
- Interest Rate: Typically, 5% per month.
- Monthly service fee: Typically R60 per month.
- VAT: 15%
What is a payday loan?
When you hear the term ‘payday loans’ it is easy to get an idea of what they mean. Basically, a payday loan is a small amount of money that you borrow while you wait for your pay date. The money can be used to cover any urgent or immediate financial needs.
Furthermore, payday loans are short-term, which means the debt has to be paid off quickly. Typically, payday loans are high-cost because of high-interest rates and fees.
How do payday loans work?
The process of getting a payday loan through CompareLoans can be summarised in a few simple steps:
- Compare – Do you need some extra cash, but your payday is still around the corner? Go through our featured payday lenders and compare offers to find a loan that meets your needs.
- Calculate – Calculate your estimated repayment over 30 days using our quick calculator above. This lets you know if you can afford the loan or not.
- Apply – By clicking ‘Go to Site’ you can apply for payday loans online in South Africa. CompareLoans features a range of payday lenders in the comparison tables above.
- Receive approval – The lender takes a quick look at the information you submitted to see if you qualify. When you meet their requirements, they will get back to you with a loan offer.
- Get your money quickly – If you’re satisfied with the terms and conditions of your loan accepting the loan offer means the cash advance is speedily transferred into your bank account. This typically happens within 24 hours or on the same day of application.
- Pay off your loan quickly – Repayments are usually made as a lump sum on your next pay date or after 30 days. Alternatively, you can make repayments in smaller instalments over a longer period. The lender places a debit order on the account that receives your salary or income. The repayment amount is then automatically deducted from the same account on the agreed date.
What are the popular features of payday loans?
Payday loans are quite popular in South Africa. Many registered credit providers offer quick cash loans on the same day that you need them. You will find payday loans advertised under different descriptions that explain how they work:
- Instant payday loans – While receiving a payday loan may not happen in a few seconds, the term “instant payday loans” simply means you get the funds much more quickly. This is compared to long term loans that offer larger loan sizes and take a while to process.
- Same day payday loans – This a common feature of payday loans: Apply today and receive the money on the same day you apply.
- Payday loans for the blacklisted – Getting approval for same day payday loans does not involve any checks on your credit history. Therefore, payday loans for the blacklisted are still available when you need them.
- Payday loans for online application – By applying for quick online payday loans in South Africa, you can receive the money you need in the comfort of your own home.
Generally, payday loans in South Africa can also be looked at as having the following features:
- They involve borrowing small amounts of money.
- As soon as your payday loan application is approved, you can receive the money in as little as minutes.
- The payday loan has to be paid off in a short space of time.
- High-interest rates and fees.
- A fixed interest rate that is around 5% per month.
- Easy access because of fewer requirements, for example, no credit checks.
Payday loans vs. short-term loans
Payday loans are typically described as short-term loans. But, are payday loans and short-term loans one and the same? Although the two options are almost the same, there are some slight differences. Firstly, payday loans are usually paid back in lump sums within 1-2 months after taking out the loan.
On the other hand, short term loans usually require smaller repayments over a longer period that ranges from 2-12 months. This is not strictly true since most lenders offer short term and payday loans as the same product, but it does apply in some cases.
When you need some extra cash fast, the question is, should you choose a payday loan or a short term loan? It all depends on what you can afford and how much you’re willing to pay in interest. Payday loans require larger repayments which can be tough on your budget.
However, larger repayments mean you finish paying off your loan earlier, so this cuts down on interest charges. In contrast, with short term loans you get more affordable, smaller repayments but because you’re taking longer to pay off the loan, you might end up paying more in interest.
Benefits of payday loans
- They can save you in an emergency since you can borrow the money quickly (typically on the same day of application).
- You can pay the loan off quickly. This means you don’t have to carry the debt for a long time. Moreover, you pay less in interest.
- You don’t need to own a valuable asset such as a car since payday loans are unsecured.
- The payday loan online application is fast and can be done in the comfort of your own home.
- If you’re an existing customer, the approval process is faster, and you can borrow more (up to R8,000).
- Are you worried about not getting a loan because of bad credit? You can rest easy because most lenders will still approve your application.
What are the risks involved with payday loans?
With payday loans in South Africa, you can pay back the money within days if you wish. Besides that, payday loans only give you access to small amounts of money, so it’s easy to tell yourself that you can afford the repayment. This is where the risk lies.
Payday loans almost always come with higher than average interest rates and fees. Compared to other types of loans such as personal loans, taking out a payday loan is an expensive way of solving your financial problems.
Interest rates for payday loans are typically set at 5%, and on top of that, you also have to pay an initiation fee, a monthly service fee, and VAT. These are extra expenses that will strain your budget the next time your paycheck comes.
The situation is worsened if you already have several debit orders placed on your account. You can be left with a low account balance that is not enough to support you throughout the month. Furthermore, your credit score can be affected if a debit order fails because of insufficient funds.
Ultimately, taking a payday loan can lead to the following problems
- Increased monthly expenses that strain your budget.
- If you take more time to pay off the loan, interest charges will be higher, making the loan less affordable and practical.
- There is a high chance of defaulting on the loan. In such cases, you’ll be faced with high penalty fees.
- Your chances of getting approved for payday loans in the future may be negatively affected.
- You can get into a cycle of taking out loans to make ends meet, which can create an unmanageable amount of debt.
When is the best time to take out a payday loan?
For special reasons, payday loans are not meant to be taken out regularly. They are often meant as a last solution to unforeseen expenses or emergencies that can’t be covered by your budget. Most people can avoid taking out payday loans by having an emergency fund.
However, for most South Africans living from paycheck to paycheck, this can be hard to do. As a result, payday loans are something of a necessity. That being said, it is best to apply for a payday loan only when you have an expense that can’t wait until your payday. If your problem is not that urgent consider waiting until payday, or applying for a personal loan which offers more personalised and cheaper rates.
What do you use a payday loan for?
Are you wondering if your particular situation requires help from a payday loan? Common uses for payday loans include:
- Fixing a car or equipment when it breaks down.
- Paying for a medical bill.
- Paying for an urgent bill such as an electricity bill.
Most often, people use payday loans for general purposes such as groceries and to pay off other debts. This is usually not recommended because the high costs of payday loans are not worth it. At the end of the day, only take out a payday loan when absolutely necessary.
Where can you get a payday loan in South Africa?
There are many payday lenders available in South Africa. But, due to the risks involved, you should always exercise caution when approaching a payday loan provider. Some unreputable lenders know that people can sign up for anything if they are desperate or have an emergency. These type of lenders are prone to charging the highest interest rates and fees on the market.
To help you avoid this, CompareLoans gives you a platform to compare payday loan offers from popular lenders. This allows you to pick a favourable loan that gives you the best help and the lowest rates.
Calculating the total costs of a payday loan
One advantage of payday loans is how they come with clear cut costs. Therefore, it is easier to have an estimate of the total costs involved. Consider the example below for a R2000 payday loan:
- Initiation fee: 16.5% on the first 1,000 and 10% thereafter, R265
- Interest rate: Typically 5% per month, R100, or 3% for existing customers
- Monthly service fee: Around R60 per calendar month
- VAT: 15%, charged on the initiation and monthly fee, R48.75
- Estimated total repayment: R2,473.75 if repaid in 30 days
These final costs are usually made available before you apply. Total costs for the same amount may vary slightly between lenders. Furthermore, the loan amount and repayment period will change the value of instalments and the total cost.
How do you pay back a payday loan?
Your repayment terms are influenced by how much money you have borrowed and the amount of time you need to pay it off. On most occasions, part of the repayment terms also requires that you give the lender permission to place a direct debit order on your account.
This means that on the due date of payment, money is automatically deducted from the account that receives your salary. This set up helps to avoid late or missed payments which can result in more charges.
However, if there are likely to be insufficient funds in your account around the time the debit order is scheduled, it is important to contact the lender ahead of time and negotiate a different payment date. This may lower penalty fees and avoid negative judgements on your credit report.
What do you need to apply for short term and payday loans online in South Africa?
You may need to meet some of the following requirements before making a payday loan application:
- You should possess a valid South African ID.
- An employed or self-employed status.
- You need a South African bank account where your salary or income is deposited.
- The income received into your bank account must be regular. Also, it must be above a certain amount. For, example, some lenders require that you earn a minimum of R2,000.
- Proof of income as shown on the latest payslips or bank statements for the last 3 months.
- Minimum age of 18 years
- Proof of residence, for example, a water bill from your local council
How to compare payday loans from different lenders in South Africa
CompareLoans has a convenient comparison table above. This allows you to compare different payday lenders in South Africa. When doing so consider:
- The maximum and minimum amount being offered – Some lenders only allow you to borrow a limited amount of money. Others will only approve your application if it’s above a certain amount. In any case, you may not want to borrow more than you need or get an amount that is not enough to solve your financial problems. Thus, it is important to check that your chosen lender permits you to borrow exactly what you need.
- The repayment term – Choosing the right repayment term is crucial to your long-term budget. You should aim to strike a balance so that you pay off your loan as soon as possible without straining your budget or paying more in interest.
- The interest rate – Expect the interest rate to be higher than other forms of personal credit such as personal loans. However, you can still negotiate or look out for relatively lower interest rates. Every cent you avoid paying is money saved.
- Other fees and charges – Initiation and monthly fees vary from lender to lender. Look for a payday loan with lower fees and a matching, reduced total cost.
- Other terms and conditions – Flexible terms and conditions offer you more benefits. For example, you should be able to finish your repayments earlier without being charged a penalty fee.
- How much is required for each instalment – Whether you are paying off the loan in one lump sum or several instalments, first calculate how much each repayment will be. This will allow you to budget correctly for the future. We have conveniently provided you with a calculator that lets you calculate repayments over 30 days for different lenders and different loan amounts.
- What you need to qualify for the loan – Some lenders may have stricter requirements. Check first to make sure you meet the eligibility criteria for the loan you’re interested in. As an example and in some rare cases, you might have a poor credit history while the loan requires a good credit score to qualify.
- How quickly can you get the loan? – Payday loans are typically for emergencies. If you need the loan within a few hours, confirm first if the lender is capable of this fast turnaround.
What you should know before applying for short term and payday loans
There are two things you should keep in mind before taking action to receive your loan:
- Review the total cost of your loan – Make sure that there are no hidden fees involved. Understand how the interest rate affects the estimated total repayment as well as other charges that may apply. This approach means you make your application with the full knowledge of all the costs involved.
- Decide if you can afford the repayments – These repayments will now be a part of your monthly budget. As such, they should be able to fit into the said budget. This is particularly important since late payments result in additional penalty fees that can upset your budget for a long time.
How to apply for short term and payday loans online
Payday loans are “famous” for being easily accessible. That is why most South African lenders have online application forms on their websites. Just click on the “Go to Site” button for each of our featured lenders to begin the application process.
Usually, the process requires you to fill in some personal details as well as other relevant details concerning your employment and finances. You may also be required to upload a few documents. After submitting the application form, the lender verifies your information before giving feedback.
Please note that even if you meet all the requirements, your loan application may still fail to get approval. However, if the application is approved, lenders typically respond quickly to meet their promise of same day payday loans.
Frequently asked questions about payday loans in South Africa
Do I have other options besides payday loans?
If you want to explore cheaper loan options, you might consider applying for a personal loan. Personal loans offer more flexibility, and they can be personalised to suit your individual circumstances.
Is it safe to apply for payday loans online in South Africa?
If you’re dealing with a registered credit provider that offers authorised financial services, they’re more likely to keep your private information confidential and secure. Payday loan applications are typically carried out online in a safe and secure manner.
Should I be worried about my credit score when applying for quick online payday loans in South Africa?
Approval for a payday loan is normally based on the amount of your income and whether it is received on a regular basis. It is always advised to work on improving your credit score, but you can still apply for a payday loan if you have bad credit. Payday loans for the blacklisted are also available.
Can I apply for a payday loan if I’m unemployed?
Payday loans are typically offered for employed and self-employed individuals who can prove that they earn a regular income above a certain amount. If you’re unemployed, there is no guarantee that you’ll be able to pay back the loan.
How many times can I apply for a payday loan?
Once you pay off your loan, you’re free to apply for another loan. Existing customers are allowed to borrow up to R8,000 while new customers are often limited to R4,000. However, many payday loan applications in a short space amount of time can lower your credit score.
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