The best average credit personal loans in South Africa
Borrowing money can be complicated since there are so many factors which determine the total cost of your loan. One of these factors is your credit score. This is a number that can be described as either bad or excellent. A bad or poor credit score can stop you from getting a loan. On the other hand, an excellent or good credit score can get you the best loan with low rates.
However, if your credit is neither bad nor excellent, that can mean you have average credit. So, what types of loans are available for you? This article takes a look at average credit personal loans and how you can get the best deal with a less than perfect score.
What is an average credit personal loan?
According to Transunion, an average credit score is one that sits between 583 and 613. Experian, a different credit bureau sets the number between 580 and 669. Lastly, Equifax agrees that this number is also between 580 and 669.
If your credit score is anywhere in this range, then you have average credit, and you qualify for an average credit personal loan. Loans for fair credit have two main features:
Why is your credit score important?
Your credit score partly determines whether you get approved for a loan or not. It also affects the interest rate you get and the amount you can borrow. That’s because this three-digit number tells the lender what they need to know about your level of risk.
In other words, the lender wants to be sure that they can get their money back after giving you a loan. The higher the credit score, the more lenders can trust you. Therefore, they’re increasingly willing to let you borrow more money at a lower rate.
However, if your credit score is average, you may not always be able to qualify for the lowest rate. Instead, to balance the level of risk you pose, lenders will charge you an interest rate that is higher than what excellent credit customers get.
Types of loans for average credit borrowers
If your credit score is average or fair, there are several loan options available in South Africa:
- Unsecured personal loans. These are very popular since they require no security. Main features include loan amounts between R1000 and R250 000 as well as repayment terms that last from 12 to 72 months. Most personal loans cover a range of uses that include home improvement, weddings, and holidays. They can even be used as debt consolidation loans.
- Secured personal loans for home-owners. This involves using the equity in your home (second mortgage) to secure your personal loan. It improves the chances of getting your loan approved at a lower interest rate since the lender can claim ownership of the house if you fail to repay.
- Short-term and payday loans. These are usually referred to as bad credit loans. If your average credit score is making it difficult to qualify for an unsecured personal loan, you can approach payday lenders since they don’t usually carry out credit checks. However, the loan has to be paid back quickly – within 30 days, 6 months, or 12 months, depending on the lender. Furthermore, because of the high interest rates and low borrowing limits, these high-cost loans are best for emergencies and short-term needs.
- Title loans. You use the title of your car to secure the loan, which means failure to repay will result in your car getting repossessed. In addition, car title loans often have high interest rates, but the good thing is you can borrow as much as your car’s value.
- Car loans. Secured car loans have low interest rates, and they enable you to buy a new or used car which can get repossessed if you fail to repay. Unsecured car loans don’t require collateral, but they can be hard to find if you only have average credit.
How to compare loans for average credit in South Africa
If you check comparison tables on this page, CompareLoans brings you many loan options to consider. When comparing loan offers, consider the following factors for best results:
- Loan requirements. Most lenders provide a full list of requirements you have to meet to qualify for a loan. General requirements for average credit personal loans include a valid South African ID, proof of income, and a minimum age of 18 years. Check if you meet all requirements to avoid wasting your time.
- Loan amount and loan term. These two factors determine the size of your monthly repayments. Use our loan calculator for average credit personal loans to choose an affordable loan. Also, make sure the lender offers the loan amount and term for your preferred monthly payment.
- Interest rate. This is an important factor that can help you save thousands of rands. While you might not be able to qualify for the lowest rates, you can still aim for the lowest personalised rate linked to your average credit score. In addition, find out if the rate is fixed or variable according to your preferences.
- Loan fees and charges. Aside from interest rate, also check for other fees or charges such as monthly service, initiation, and penalty fees. Find out which loan has the lowest total cost by looking at the APR or comparison rate. It includes the interest rate plus all other fees and charges. You can click the “View fees and additional info” link in our comparison tables for a better comparison.
- Other unique features. Find out which lender is offering personal loans with the best advantages. Features like excellent customer service, fast responses, and an easy online application might be more valuable to you. If you wish to apply for your online loan while on this page, simply click the “Go to Site” button for your desired lender in the comparison tables above.
5 tips that take your credit score from average to excellent
- Keep building your credit. If you are a relatively new borrower, it might take a while before your credit score becomes high enough. Keep your low-cost credit accounts open (or apply for more) so that your credit utilisation rate improves.
- Fix any errors. This requires you to check your credit report and correct errors that are keeping your credit score low. You can get a free credit report every 12 months from any of the major credit bureaus in South Africa.
- Pay off your debts as quickly as possible. If you have less debt, this increases your debt-to-income ratio and improves your score.
- Be punctual. Always pay your monthly instalments on time. This good behaviour will be recorded in your credit history, and it will improve your score in the long run.
- Apply for a minimum number of times. Limit the number of loan applications you make, since too many hard enquiries over a short space of time can lower your credit score.
Read about more extra tips that help improve your credit score.
Other ways to improve your approval chances if you have average credit
- Get a cosigner. Find out if the lender will allow you to add a co-signer with a better credit score than you.
- Secure the loan. A secured loan gives the lender something to hold on to if you fail to repay. The lowered risk makes them more willing to consider your application.
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