Minimum and maximum loan periods vary between 1 months and 10 years. Comparison interest rates vary between 6.55% and 60% p.a. Total interest repayments vary between R685.05 and R844.12 over the life of the loan. *Comparison rate is based on an unsecured loan of R20,000 for a term of 3 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. These rates can change without further notice. All rates quoted are per annum. For more information regarding fees click on "View fees & additional info +" for each product or contact the provider.
Personal loans for bad credit in South Africa
A bad credit report can stop you from getting the cash loan you need in times of emergencies. However, having bad credit is not something to be ashamed of. It happens to the best of us, and it can be fixed.
In the meanwhile and, luckily, there are bad credit personal loans you can apply for in such specific situations. If you’re looking for urgent loans for bad credit, there are several options available. Our calculator helps you to compare different loans for bad credit so you can choose the best loan for your needs.
What does it mean to have bad credit?
Basically, your credit score is a number that shows how good you are at paying back borrowed money. As an example, the TransUnion Credit Bureau uses a credit rating system that ranges from 0-999:
- 767 – 999 (Very good)
- 681 – 766 (Good)
- 614 – 680 (Favourable)
- 583 – 613 (Fair)
- 527 – 582 (Below Average)
- 487 – 526 (Unfavourable)
- Below 487 (Poor)
In this case, if your credit rating is below 487, it means you’re not very good at paying back borrowed money. If, however, your credit score is above 681, it shows that you can be trusted to pay back your loan. To sum it up, the higher your credit score, the better.
Causes of bad credit
There are two main causes of bad credit:
- When you have bad credit, it does not always mean that you are bad at paying back loans. Sometimes it simply means there is no proof that you’re good at repaying borrowed money.
This usually happens when you have never taken a loan or credit before, and there is very little information in your credit history. So, lenders are not sure if you can be trusted to pay back the money if they give you a loan.
- In the second case, bad credit is caused by failing to pay back the loans you have received. This can happen if you lose your job suddenly or you haven’t prioritised your monthly instalments in your budget.
In any case, lenders will consider you to be high risk if you have a low credit score or a non-active credit history.
How to check your credit score
The National Credit Act gives every South African the right to get one free credit report per year. You can get this free credit report from credit bureaus such as TransUnion, Experian, and Compuscan. If you have already received a free credit report and want another one, later on, you will have to pay a small, minimal fee, to these credit bureaus.
On top of that, you can even pay for a monthly service that sends you updated details of your credit report. This allows you to stay informed so you can make the right decisions to keep your credit score healthy.
How to fix your bad credit score
- Pay your loan instalments on time.
- Avoid skipping your loan payments. Try to pay in full on the agreed date every month.
- Negotiate with your lenders if you have some difficulty with making the monthly payments.
- Check your credit report as often as possible to make sure all the information is correct.
- Spend money wisely to avoid debt that you can’t afford.
To learn more on how to improve your credit rating, check out these 13 tips.
Types of bad credit loans
The following are different kinds of personal loans for bad credit:
- Secured loans – These are the easiest to apply for if you’re looking for urgent loans for bad credit. This is because you use your property (car, home, etc.) to secure the loan, so there is a lower risk for the lender. However, you can lose your car or home if you don’t pay back the loan as agreed.
- Unsecured loans – Unsecured loans don’t require you to use your valuable assets as security against the loan. But, if you have bad credit, you might have to pay very high-interest rates. Furthermore, you’re limited in the amount of money that you can borrow.
Besides personal loans, you can also take out the following loans when you have bad credit:
- Payday loans – Generally, personal loans have longer repayment terms. However, payday loans have very short repayment periods. Most people usually take payday loans when they need urgent cash.
Once their payday arrives in the same month, they have to pay back the money. Because they’re a type of unsecured loan, and you can qualify for one even when you have bad credit, interest rates for payday loans can be very high.
- Home equity loans – If you are a homeowner, you can use your home to secure a loan. This enables you to borrow a large amount of money when you have bad credit. Home equity loans are usually long term and have fixed monthly repayments.
How to apply for a bad credit personal loan
Loan applications for bad credit loans typically have the following standard requirements:
- South African ID;
- proof of regular income;
- you should be at least 18 years or 21 years; and
- for a secured loan you need proof of ownership for the property you are using to secure the loan.
Once you have all the requirements in place, carry out proper research to find out which trustworthy lenders offer affordable loans. Apply for the most suitable loan by following the correct application procedure. The good thing is, you can apply for most loans online, which makes the process easier and faster.
Important things to know about loans for bad credit
- It is safer to fully understand all the terms and conditions associated with the loan you want to take out. Bad credit loans typically have very high-interest rates and other expensive fees. Besides that, it is better to make sure you are comfortable with the monthly instalments and other requirements before you accept the loan.
- There is no guarantee that you will get a loan when you have bad credit. Some banks and credit unions are simply not willing to take the risk.
- It is best to work with reputable lenders that offer authorised financial services. This helps you to avoid scammers that want to take advantage of people with bad credit. All lenders showcased on this page are legitimate and registered with NCR (National Credit Regulator).
Compare personal loans for bad credit to get the best deal
A bad credit score is something that can easily happen to anyone. However, it should not stop you from getting financial help when you need it. Our calculator helps you to compare different bad credit loans in South Africa.
All you have to do is choose the loan amount you want and the length of time you need to pay back the loan. Next, click on “Calculate Repayment.” You will instantly get results that will give you an idea of whether applying for a loan is best for you or not.
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