It’s almost inevitable that we will come across situations where we need a little extra cash. A lowest-interest personal loan in South Africa is the best way to finance an emergency, a car, or even a holiday – get approved for up to R250,000 with a low rate starting from 9.75% and a term of up to 6 years.
What is a personal loan?
A personal loan is a loan obtained from a lender, typically a bank or credit union. To repay the money you borrowed, you must make monthly payments that include interest as well. These payments typically take many months to repay.
- You can borrow between R2000 and R300,000
- You can pay back the money over a period that is between 1 month and 84 months (7 years)
- The funds can be used for personal purposes. The loans can be used for any purpose, from renovating a home to buying a car to consolidating debt to paying for wedding expenses. The choice is yours.
How do personal loans work in South Africa?
Generally, the process of taking out a personal loan involves these steps:
1. Comparing loans
Loans come in different types. The various types of loans offer different benefits and disadvantages, as well as different terms and conditions. It is imperative that you compare your options so you can select the most appropriate personal loan. Take your time to navigate through this page to find out the best available loan providers in South Africa.
2. Checking the requirements to see if you qualify
In addition to finding a product that fits your situation and budget perfectly, you must make sure that all of the information and documentation you need is available for the application. In addition to meeting certain requirements, you must also be of a certain age or have a certain income.
3. Approaching the lender and making an application
You can then make an application with the appropriate lender if you qualify. An online check-in, a telephone call, or a branch visit are all options.
4. Getting approved and agreeing to the terms and conditions
Upon approval of your application, a lender will make you an offer. This is the credit agreement between you and the lender. In addition to the amount you will receive, the interest rate for the loan, and how long you will have to pay it back, you’ll see the exact terms of your loan. As soon as the lender accepts your offer, the money is transferred into your bank account.
5. Paying back
Monthly payments are typically made to repay debt. The amount of each payment depends on the total cost of the loan. Along with duration and monthly repayments, other terms and conditions may apply, such as early repayment penalties.
What are personal loan interest rates in South Africa?
Lenders determine the interest rate on your personal loan. The agreement to the terms of the contract also includes your agreement to this set interest rate. According to the National Credit Act Regulation, the maximum interest rate in South Africa is 27.50 percent per annum.
The interest rate varies from lender to lender. However, they can be defined as either fixed or variable. Typically, your lender will start charging you interest from the date that the loan is drawn down into your bank account.
Fixed-rate vs. variable rate
The interest rate on a loan can either be fixed or variable. A fixed-rate remains the same throughout the life of the loan. Variable rates, however, can either increase or decrease at any time. Variable rates behave in this way due to the Prime Market Rate (PMR).
In South Africa, the PMR is used to borrow money from the Reserve Bank of the country. Generally, fixed rates are safer because you always know how much you will pay each month. Normally, a bank charges the prime market rate plus an extra percentage, which they call interest. In this way, you can budget your finances in advance. If, however, you choose a variable rate for your loan, you stand a chance that the interest will go down, which will reduce your repayments.
However, predicting the future is difficult or even impossible. In addition, the interest rate can rise, resulting in higher monthly payments.
Which bank has the lowest personal loan interest rate
After intense research and financial analyses, the following credit service providers came up top of the list of on radar;
This is one of the people’s favorite banks. African Bank is a locally controlled bank and it is currently under the curatorship of the South African Reserve Bank. Though they provide loans with fluctuating interest rates, they operate with one of the best terms.
Operating with a fixed interest rate of 12.75%, FNB ranks as one of the best credit providers in the country. Apart from the fact that they grant loans with cheap interest rates, they operate with a flexible loan term too. Having been in existence since 1838, FNB is known for providing various banking services to millions of customers in South Africa.
Listed on the JSE, the Capitec bank is one of Africa’s largest diversified financial services providers. Committing a great percentage of their resources on finding local solutions to uniquely local challenges. They are driven by the zeal of adding value and improving the lives of Africans. To this end, the Capitec loan offers a fixed interest rate of 12.9%.
Ned bank is a South African-owned Bank. It has a good track record in South Africa. Though they operate with a flexible interest rate, they’ve proven to provide one of the best loan services over time.
Another great option for financial providers with cheap interest rates is the Absa financial group. Irrespective of the fact that it does not fix their interest rates, one look at their repayment term will convince you.
A lot of people don’t know this but it is possible to save a portion of your income while still paying up your loans. By repaying your loan amount at a far lesser interest rate, you get the financial flexibility to possibly save or spend that portion on other things