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.
About low interest personal loans in South Africa
Interested in finding out about low interest personal loans? With so many South Africans living from paycheck to paycheck, borrowing money should not be expensive. With a personal loan that has a competitive interest rate, you can easily finance large purchases, consolidate debt, or cover emergency expenses.
For best results, use the information in this article to choose an affordable and personalised loan that helps you save money.
Low-interest personal loan: Main features
- These types of loans are usually offered by reputable South African lenders;
- Typically, payments are made via monthly instalments;
- Repayment periods usually range from 6 to 84 months (7 years);
- You can borrow loan amounts starting from R2000 up to R300 000;
- Interest rates can be fixed or variable; and
- Personal loans can be secured or unsecured.
How to get a low interest personal loan in South Africa
There are several ways you can get a low interest personal loan including the following:
Maintain a good credit score
Lenders usually perform credit checks before they can approve your personal loan application. Your credit report supplies information about your behaviour when it comes to borrowing money and paying it back. This information includes details about any loans you have previously taken out and whether you repaid them correctly.
The credit check, therefore, tells the lender whether giving you a loan is a good idea or not. A low credit score can tell the lender that approving your loan application would be high risk. Therefore, if they decide to do so they usually attach a high-interest rate to your loan. If you have a positive credit history, you are more likely to get a low interest rate on your personal loan.
Provide sufficient proof of income
Usually, lenders require you to be earning a specified minimum monthly income. When you make a personal loan application, it helps to provide as many details as you can about your financial and employment history. Documents such as payslips and bank statements dating as far back as the last 3 months are often used as proof of having a regular income. This helps to show you’re a low-risk customer capable of making repayments responsibly.
One of the ways to get a low interest rate loan is to compare lenders. Different lenders offer loans with varied interest rates. Some lenders charge higher interest rates than others. Therefore, it is important to make sure that before you take out a loan, you compare what other lenders are offering. Once you look at different lenders and how much their loans cost, you can then compare and see which loan provider offers the best terms.
Negotiate for a lower interest on your loan
As a customer, you should feel free to approach your lender and negotiate for a better deal. Some lenders offer discounts that you can take advantage of if you have done your research properly. In addition, being a responsible borrower and a loyal customer makes it easier to negotiate for a low interest loan.
Lower your debt risk and interest rate by securing your loan
When you take out a low-interest personal loan, you can decide whether you want it secured or unsecured. A secured personal loan is protected by an asset and is, therefore, less risky. This means that if you fail to pay back the loan, the lender can take that asset and use it to recover their money.
Since the lender has a way of recovering their money, they do not have to charge you a lot in terms of interest. With a low interest personal loan that’s unsecured, it is quite difficult for the lender to recover their money. Thus, they prefer to charge a higher interest rate to protect themselves from any potential loss.
Choose between a low-interest loan that has a fixed rate or variable rate
Low-interest personal loans can either have a fixed rate or variable rate. The best option for you between the two depends on your personal preference. Fixed-rate personal loans offer more peace of mind since you always pay the same monthly instalment that doesn’t change. But, the catch is, you won’t save money if the market rate drops.
For variable rates, there is an uncertainty factor that can be worrying for some people. However, variable rates offer greater flexibility that allows you to reduce monthly repayments if the market rate drops during the life of the loan. Looking at the advantages and disadvantages of both options will help you settle on a personal loan plan that works for you.
Advantages of fixed-rate loans
- If the market rate increases your monthly payments remain the same;
- You don’t have to keep adjusting your monthly budget which is convenient; and
- The stability of paying the same instalment amount every month gives you peace of mind.
Disadvantages of fixed-rate loans
- If the market rate decreases you’ll still have to make higher interest payments;
- Interest rates are usually higher compared to variable-rate loans; and
- They usually have less flexible terms compared to variable-rate loans.
Advantages of variable rate loans
- You can save money if the market rate falls;
- They usually have lower starting rates compared to fixed-rate loans; and
- More flexible terms compared to fixed-rate loans.
Disadvantages of variable rate loans
- If the rate increases, the total cost of the loan can become higher as your monthly repayments also increase; and
- You might have to keep readjusting your budget as rates fluctuate which makes it harder to plan ahead.
What other costs come with loans besides the interest rate?
Some loans have low interest rates but they end up being expensive because of other costs. That means you also have to consider other fees attached to loans when making comparisons. The easiest way to do this is to look at the loan’s APR (Annual Percentage Rate). The APR helps you calculate the total cost of the loan, inclusive of interest and other stated or hidden fees.
Some loans come with loan services fees that are paid as part of your monthly instalments. You can also compare initiation fees; these can be paid upfront or spread out with your monthly instalments. Comparing all these fees will help you to get a loan with the best rates, overall.
When does it make sense to take out a low-interest personal loan?
Several situations might require you to take out a personal loan. These include but are not limited to, the following:
When you want to consolidate your debt
There are times when you need to apply for a debt consolidation loan that covers and combines all your different debts and loans into one account. This approach has several potential advantages, including a lower interest rate, making the loan cheaper and easier to pay back. You will also be left with a single, monthly instalment which is way easier to manage.
As an alternative to payday loans and credit cards
If you manage to qualify for a low-interest personal loan, it can be a better alternative to a payday loan or credit card because of the lower costs involved. Payday loans often come at high costs since most of them are unsecured and extremely short-term. These types of loans are also offered to people with bad credit, which might explain why lenders charge high interest rates for these types of loans.
It makes sense to take out a low interest rate personal loan if you want to move. This can help you to cover transport and other costs if you do not have enough savings.
Home remodeling or repairs
A low-interest personal loan can help you to fund your home repairs or remodeling costs. Whether you want to install new solar panels, fix the driveway, or apply a fresh coat of paint, you can make use of a personal loan.
If you get a surprise visit from an unexpected expense when you’re not financially prepared, a personal loan might be the only solution. Some South African lenders have a quick response time for applications involving small loans at a low interest rate. That means you can get the cash in your account in time to meet any urgent need.
For making large purchases
A personal loan can enable you to make a big purchase that you cannot fund from your savings alone. You might be getting a new kitchen, maybe some home computers or appliances. If the loan has a low-interest rate, it might make sense to take it out instead of paying monthly instalments for the appliance itself.
Taking advantage of an investment opportunity
Sometimes you can get an unexpected investment opportunity that you can not miss. In such cases, you can choose to take out a low interest rate personal loan, especially if the investment will bring returns that are way above the cost of the loan.
Should you look at other features of the loan besides the interest rate and costs?
Besides the interest rate and costs, other factors will contribute to whether a particular loan is favourable. These include the following:
Some loans have requirements that are more difficult to meet than others. That means your application may get rejected if you don’t meet some of the requirements. However, if you get approved, the loan will likely have a lower cost in terms of interest and other fees.
You need a loan that can allow you to pay monthly instalments which you can afford. If the loan term is longer, your monthly instalments will be lowered, but you might have to pay back more because of interest that will accumulate over the loan’s long life.
Some lenders will allow you to skip monthly payments if you need to. This depends on the flexibility of the repayment terms and how strict the lender is. Obviously, loans with flexible terms are preferable. Also, check if you’ll be able to make repayments earlier, and if there are any penalty fees involved. Sometimes you can get the money to pay back your loan earlier than expected, and it’s a bonus if the lender accepts early repayments.
How to get a low-interest loan in South Africa
Most lenders allow you to apply for their low interest loans online. CompareLoans has made the process even easier by featuring top South African lenders in their comparison tables above. You can take a look at the available options, and once you have selected your loan of choice, simply click the “Go to Site” button, which takes you to the correct site where you can fill an application form. Keep in mind that general requirements for personal loans in South Africa are as follows:
- Minimum age of 18 years;
- Be a South African citizen with a valid ID;
- A good credit score;
- South African bank account; and
- Proof of income documents such as payslips and bank statements.
More questions and answers about low-interest loans
Which lenders in South Africa offer the best personal loans with low-interest rates?
Many credit providers offer low-interest loans in South Africa. You can browse the comparison tables on this page for a list of popular lenders that are fully registered and licenced.
What is considered a low interest rate?
There is no specific number since this varies from lender to lender. Generally, interest rates can be as low as 15% (or even lower). However, keep in mind that a low-interest rate loan doesn’t necessarily mean the loan is cheaper since there might be hidden costs.
Are there any low interest consolidation loans for bad credit?
Yes. Low interest consolidation loans for bad credit are designed for debt management since they combine all your monthly repayments into a single instalment. This potentially saves you money since you will only be charged interest and fees for one account instead of several. Read more about debt consolidation loans.
Is a low interest personal loan calculator available?
Yes. You can use this fast low interest loan repayment calculator to determine which payment fits into your monthly debt budget. Just enter your loan amount and term and proceed to click “Calculate Repayment” for fast results.
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