Payday Loan

Need a payday loan? You can find the best payday loans in South Africa that offer easy, fast cash to meet your urgent financial needs. Apply for a payday loan online today with CashCrescent and compare offers from your phone.

What You Need to Know About Payday Loans

A survey by fintech platform, Pay Curve, showed that nearly 80% of South Africans look for expensive, unsecured loans to cover their monthly expenses. 

So, even though payday loans are notorious for having high interest rates, sometimes people have no choice but to seek them out. In that case, it’s crucial to understand payday loans to ensure informed decisions. 

What Are Payday Loans?

There are three factors that define a payday loan.

• Small loan amounts. Payday loan companies in South Africa typically offer from R500 up to R8 000. This is a small limit compared to personal loans which go up to R250,000 or more. 
• Short terms. Payday loans offer short-term credit. Traditionally, you were required to pay your debt in full in a single payment on your next payday. However, some lenders now offer flexible repayment terms of up to six months.
• High interest rates. This type of credit tends to carry very high interest rates because payday lenders often deal with high-risk customers. So they charge expensive interest rates to lower this risk. The most expensive payday loans offering fast cash don’t require a credit check and are available to blacklisted or bad credit borrowers.

Bottom line: A payday loan is a short-term, high-interest loan for a small amount that’s usually repaid once you get paid, or in instalments over up to six months. Payday loans are also known as cash advances.

How Do Payday Loans Work?

Here are some helpful answers to common questions about SA payday loans to help you understand how they work.

• How much can you get? – Payday loan providers typically offer R500–R8,000. Borrowing limits depend on how much you afford, and whether you have a good credit history of making on-time payments.
• What’s the repayment period? – It depends on the lender. Minimum repayment periods can be as low as 2 days or as high as 6 months. Make sure you choose a repayment period you can afford to meet.
• Is it secured or unsecured credit? – Most payday loans are unsecured. That means you don’t have to offer collateral such as your car to secure the debt.
• What’s the interest rate? – Interest rates vary between lenders, but the norm is usually 0.1–0.17% per day or 3-5% per month. 
• What about fees? – Payday loan charges typically include an initiation fee, monthly service fee, and a credit insurance premium. The APR (interest rate + fees) range from 60% to over 200%. Some lenders charge additional interest and a late payment fee for outstanding balances.
• Where can I get a payday loan? – You can apply with an online lender from wherever you are.
• How do I qualify? – Most providers consider your monthly income, so you must provide your latest bank statement payslips. You must also be at least 18 years of age with a valid South African ID.
• How long does it take? – The best payday loans are available as fast cash payable into your bank account within minutes or hours of approval.
• How do I repay the debt? – Usually, you’re asked to choose a specific due date that works for your pay cycle. Most lenders deduct the money from your account via debit order.
• What are payday loans most commonly used for? – This type of credit is commonly used to cover urgent financial needs, emergency expenses, and basic necessities. The list includes groceries, transport, rent, car repairs, and medical bills.

Examples of Payday Loans

Representative Example 1: If you borrow R3000 over 30 days, the total repayable amount is approximately R3,609. This is calculated at an interest rate of 0.16% per day and includes an initiation fee as well as a service fee of R69 per month.

Representative Example 2: If you borrow R5 000 over 2 months at an interest rate of 3% per month, you’ll pay two monthly instalments of R3 057 each. The total fees and interest will be R1 011 and include an initiation fee of R649 and a service fee of R69 per month. The total repayment comes to R6 114.

Representative Example 3: A payday loan of R8 000 over 3 months at an interest rate of 0.17% totals R10 305. You’ll make 3 monthly of approximately R3 435 each. Total interest and fees add up to approx. R2 305, and includes an initiation and monthly service fee plus insurance premium.

Types of Payday Loans

SA payday loans for South Africans may have different features as seen below.

Payday Loans With No Credit Check

No credit check payday loans are also referred to as payday loans for those with poor credit scores. Some lenders don’t rely on a credit check to determine whether you qualify. Instead, they look at your monthly income and expenses to evaluate your ability to afford the debt. 

So, the most important requirement is to provide proof of a reliable income. However, payday loans for bad credit often have extremely high interest rates and fees. That’s because most lenders believe there’s a high risk that borrowers will default if they have a poor credit history.

Instant Payday Loans

Instant approval payday loans are usually offered by online lenders who offer a quick and easy online application process. These quick payday loans are advertised in different ways. They may be called fast payday loans or urgent payday loans. 

The one hour payday loan falls under this category. It’s possible to complete an online application, get approved, and have money transferred to your bank account within the hour. The 1-hour payday loan is also known as an emergency loan because it provides immediate access to funds when you need cash urgently. Be sure to check if the details you have submitted on the online form are correct to avoid delays. Processing your application is faster if the lender has accurate information.

However, although many lenders promise fast payday loans online, it doesn’t necessarily mean the money will reflect in your bank account instantly. Depending on which bank you use, it might take up to 24 hours or more before you can withdraw the money. In addition, the quick service usually comes at a high cost.

Traditional Payday Loans

Traditional payday loans work like a cash advance. The lender transfers money into your bank account, and you pay it back with your next salary. The loan amounts tend to be small since the entire debt has to be repaid as a lump sum on your next payday. 

The lender may allow you to apply for a second loan as long as you make payments on time. Some lenders offer extra benefits to repeat customers, such as rate discounts, loan increases, and quicker funding. 

Instalment Payday Loans

When looking for a payday loan, it’s possible to find lenders that offer longer terms. So instead of repaying the full amount on your next payday, you can pay over 1, 2, 3, 4, 5, or 6 months. Instalment payday loans allow borrowers to make smaller, more manageable payments. But the longer period makes things more expensive as the high rates and fees add up. 

Rollover loans are another similar type of credit where you extend the repayment date of an existing payday loan. Another option is taking out a new loan to cover the old one. The problem with renewing or rolling over a payday loan is that you’ll pay a steep fee to delay the due date. This fee does nothing to reduce the principal amount, and interest continues to accrue.

Online Payday Loans

Online payday loans refer to any type of payday loan you can get online without leaving your home. The money is usually deposited directly into your bank account. These online loans are highly convenient especially if you don’t have to manually upload your documents online. 

Some payday loan providers connect directly with your bank to obtain the necessary paperwork. The best payday loan companies also leverage technology to ensure a 100% online application process. This enables them to provide fast cash loans with instant approval and fund transfers, often on the same day.

Why Are Payday Loans So Popular?

Let’s look at the reasons why payday loans are popular in South Africa, despite the risks.

• Easy application. Internet payday loans are making credit even more accessible. Anyone with an internet connection can apply for payday loans online in South Africa. Most lenders have engineered an easy 100% application process that takes less than 10 minutes to complete.
• Easy approval. Lenders offering this type of credit often have flexible eligibility requirements. For example, they may consider borrowers who are blacklisted or have bad credit. These borrowers usually have trouble qualifying for credit elsewhere.
• Fast cash. Payday loans offer a quick cash boost with funds often transferred on the same day of approval, sometimes within minutes or a few hours. Most people looking for a payday loan need the money quickly. Payday loan providers can meet this need.
• Tough economy. Many South Africans, particularly low-income earners, are struggling financially amidst an economic crisis. Some have no choice but to resort to expensive payday loans when banks and other lenders are not willing to extend credit. Payday loans are popular because they may be the only alternative available when borrowers need extra cash.
• Many lenders to choose from. Consumers have plenty of options to choose from, and the industry is very competitive. Some credit providers advertise very attractive terms, such as no credit checks, instant approval, and quick cash. This may influence borrowers’ decision to take out credit.
• Flexible repayment terms. These days, payday loans are no longer due on the next payday. They can now be a long-term credit solution with flexible monthly instalments (up to 3 or 6 months). The smaller repayments make things more affordable.
• Small loan amounts. While personal loans have lower interest rates, finding a small loan can be challenging. Borrowers with a temporary, immediate need are not interested in taking out large amounts. They turn to payday loans to get a relatively low amount. It’s easier to keep the level of debt under control this way.
• Many uses. Payday loans should ideally be used to cover immediate financial needs and emergency expenses. But once the funds are disbursed, there’s nothing stopping borrowers from using the money for non-urgent expenses – which they often do.

Reasons to Get A Payday Loan

Payday loans are usually recommended as a last-resort option due to the high interest rates. Let’s consider certain situations where borrowers find themselves looking for a payday loan.

• To cover emergency expenses. Even if you budget carefully, unplanned events can become unexpected financial burdens. Payday cash loans assist with these urgent expenses and provide short-term financial relief.
• To make time-sensitive payments. When faced with financial hardships, there are some bills, payments, or expenses you can’t afford to ignore. For example, you may need to pay rent ASAP or face eviction, and a payday loan delivers the money you need on time. Missing a bill or payment may also be more expensive than the fees charged by payday lenders.
• To maintain a healthy cash flow. Sometimes taking out a payday loan allows you to cover regular expenses and still have money in your pocket. Small payday loans are relatively affordable and help cover critical cash flow gaps in the short term. They should be taken out only when you’re confident about receiving enough funds in the future to cover the debt. 
• To survive until the next paycheck. Life happens, whether you have unexpected financial difficulties or fail to budget properly. Borrowing a carefully calculated amount might help you live until the next paycheck.
• If your credit is not perfect. Getting a bank loan may prove impossible with a bad credit history. In addition, the option to borrow from family and friends may not always be available. Payday lenders can agree to extend credit to help you back on your feet while you work on building your credit. In this case, individuals are forced to take out a payday loan simply because there’s no other option.

Risks Associated With Payday Loans

High Borrowing Costs

Taking out a payday loan may not be a financially healthy move, due to the high interest rates and fees. Here’s an example of an instalment loan to illustrate the point:

If you borrow R8000 over 6 months at an interest rate of 3%, your monthly repayment will be approximately R1 875. The total cost of the loan will be approximately R11 250, including an initiation fee of R1 380 and a monthly service of R69 (APR of 104%). Max APR is 212%.

The total cost of the loan doesn’t seem so bad but keep in mind that this is only the minimum APR. The maximum APR is a whopping 212%. At that rate, it’s easy to end up paying back more than the original borrowed amount. In some cases, payday loans may have an APR as high as 400%.

What to do: Even if you can afford to pay your loan, consider if the cost is worth it. If it is, it’s in your best interests to borrow only what you need and settle the debt as soon as you can.

Dealing With Unlicensed Lenders Or Scammers

Unlicensed credit providers, also known as loan sharks or mashonisa, prey on the poor and take advantage of desperate borrowers. It’s important to borrow only from registered credit providers to avoid getting scammed or potential loss of personal and sensitive information. Look for the following to help you identify unlicensed lenders:

• Offers that seem too good to be true. For example, a lender might offer an instant cash loan in 1 hour without documents and say things like ‘no credit check’ or ‘guaranteed approval’.
• If the website looks suspicious, unprofessional or not secure, this may be a ploy to steal your information. 
• Asking you to pay money upfront before you can receive the cash. A legitimate lender usually deducts any upfront fees from the loan you borrowed.
• The lender pressures you to accept their offer and asks you to act immediately.
• If a lender is offering no credit check loans, it means they don’t care about your ability to repay or whether you have other financial obligations. They want to trap you in a vicious debt cycle that benefits them the most.

What to do: Check first that your preferred lender is registered with the national credit regulator. In addition, read lender reviews to determine whether the credit provider is reliable.

Debt Cycle Trap

The majority of people who rely on payday lenders are repeat customers. One-time customers are rare in the industry. Most repeat borrowers have certain characteristics that make them dependent on payday lenders. For example, they’re usually young borrowers, high school graduates, people with children, or renters. 

These borrowers usually have no access to any other type of credit, have filed for bankruptcy, or have undergone debt review. Many of them also don’t have a plan to pay off the debt in full on the requested date. So they fall into a continuous cycle of borrowing. The fees and interest keep adding up, and the individual sinks deeper and deeper into debt. 

What to do: Make sure you can afford to repay the debt comfortably before applying. Compare offers from different lenders to find the best repayment terms and rates that work for your budget. If you think you might have problems, don’t borrow.

Borrowing for the Wrong Reasons

Payday lenders make it too easy to borrow money even when you don’t need it. Check out some of the tempting offers lenders use to attract borrowers:

• Get up to R8000 in your account by 5 PM today!
• Easy application. No paperwork. Get funded in one business day.
• Same day online cash loans up to R8000. Get an instant answer!

These offers might tempt you to borrow for the wrong reasons, such as using payday loans for debt consolidation and major purchases. Also avoid using payday loans for long-term needs, recurring/daily expenses, or to raise one’s standard of living. 

What to do: The best use of payday loans is for emergencies and to ensure survival until the next payday. If your financial situation is not critical, consider other less expensive alternatives.

Aggressive Debt Collection Methods

Most payday lenders have strict non-payment procedures. If you can’t repay the debt and don’t communicate with the lender, your account may be handed over to an external debt collector. Some debt collectors employ aggressive tactics to get you to settle the debt. 

For example, they’ll call you at inconvenient times and threaten you with some negative action, like taking you to court. The harassment can be stressful and might even extend to your family and friends. The lender may also try to repeatedly withdraw money from your bank, resulting in numerous bank charges.

What to do: Notify the lender immediately if you can’t make repayments on the agreed date. Most payday lenders are willing to work with you to find a solution or payment arrangement to recover their money. Do your best to settle the debt within a reasonable period to avoid costs adding up from additional interest and late payment penalties.

Damage to Your Credit Score

As mentioned, payday loans can potentially trap you in a vicious debt cycle where you struggle to service your debts. The risk of damaging your credit score is very high in this scenario. You may still struggle even if the lender adjusts your payment plan. The problem is that lenders expect to recover their money over a reasonable period. 

If this doesn’t happen, they may take drastic action, such as notifying credit bureaus or taking you to court to obtain a judgment. Negative listings on your credit profile remain for many years even after you’ve settled. Your trust rating with the lender will fall, and you may not be able to borrow from them again. Qualifying for credit elsewhere in the future could also be more challenging.

What to do: If you have defaulted, exhaust all options to get money to pay off the debt rather than ruin your credit. For example, you can borrow from family and friends or free funds by cancelling less pressing payments or bills.

Not Reading Loan Terms

Payday loan companies are not always upfront about how much they charge. Some providers include hidden fees. Others may confuse you with complicated interest rate calculations. Even if all the relevant fees are disclosed upfront, things like early repayment or late payment might trigger expensive charges you were not aware of. 

The good news is that all loan terms are usually included in the contract. The lender will send over the paperwork and ask you to sign or agree to the terms. If you rush to do this without reading the terms and conditions, you may find yourself dealing with a nasty surprise when it’s too late to back out.

What to do: Even if you believe you have found the best online payday loan for your needs, always read the contract carefully and understand what you’re getting into before signing. 

What Are the Pros and Cons of Payday Loans?

Is taking out a payday loan a good idea in South Africa? Weigh the pros and cons quickly to determine the best way forward.

Pros of Payday Loans

✔️ Many payday loan companies to choose from.

✔️ Fast and easy 100% online application.

✔️ Get cash in your bank account quickly.

✔️ You’re free to use the money for any purpose.

✔️ You might still qualify with bad credit.

✔️ Smaller loan amounts and repayments are easier to manage.

✔️ You can now pay back in instalments.

Cons of Payday Loans

❌ Interest rates and fees can be high.

❌ Can lead to a vicious debt cycle.

❌ Disreputable lenders that take advantage of borrowers.

❌ Repayment is due in a very short amount of time.

❌ Late payments may mean extra costs and damage to your credit score.

Payday Loans Vs. Personal Loans

Before you start looking for a payday loan, we recommend that you consider better options that are less expensive. Personal loans are the most common payday loan alternative. Both options are a type of unsecured credit accessible online. But what are the differences between the two? 

Payday Loans	Personal Loans
Fast approval and funding.	May require more paperwork, and funding might take time.
Best used for emergency expenses.	Flexible uses like debt consolidation, home renovations, etc.
High interest rates and fees	Lower interest rates and fees.
Short loan terms (max. 6 months)	Longer terms (up to 7 years)
Smaller amounts (max R8 000)	Larger amounts (up to R250,000)
May not be the best way to build credit.	Help build credit over time if you make payments on time.
Easier approval for bad credit clients but with higher rates.	Bad credit personal loans may not always be available but tend to have lower rates.

Other Payday Loan Alternatives

• 0 interest credit cards. The promotional period for zero interest loans can last over 30 days. This could be enough to give you short term financial relief at a lower cost.
• Employer advances. Asking your employer for a salary advance is often better than borrowing at high interest rates to pay regular monthly expenses.
• Loans from family and friends. These loans often carry no interest or fees and have flexible repayment terms.
• Pawnshops. Consider pawning or selling old and unused possessions to unlock more cash flow.
• Reorganize your budget. Analyse your cash inflows and outflows and eliminate any expenses that aren’t crucial to free up more disposable income. 
• Negotiate with your lenders. If you can’t service existing debts comfortably, talk to your lenders and ask for a more affordable payment plan.
• Find a debt management plan. Professional debt management companies like debtbusters offer expert credit advice to help you manage debts effectively.

How to Compare Payday Loans Online

Here are essential factors to consider when looking for a payday loan:

» Interest rates. Payday loan rates are typically higher than personal loan rates. So it’s even more crucial to shop for the lowest interest rate available to lower borrowing costs. You should also check that the lender charges interest only on the days you borrow. We recommend that you borrow from credit providers authorised and regulated by the NCR (National Credit Regulator). Unregistered credit providers usually charge predatory rates.

» Fees and other costs. Look closely at the fees, including the service fee, initiation fee, early repayment fee, late payment fee, and insurance premium. Also check the Annual Percentage Rate (APR), which indicates the cost of payday loan rates and fees combined. A lower APR generally means cheaper credit.

» Loan amounts. Check that the payday lender you choose offers the amount you need. But keep in mind that payday lenders rarely offer an amount above R8,000. It’s best to look for a personal loan if you need a larger amount.

» Repayment terms. Some payday lenders offer flexible repayment options of up to six months. Others require you to pay back the money on your next payday. Make sure the repayment terms match your budget. It’s also better to find a lender that lets you choose a repayment date that works for you.

» How long the process takes. The best payday loans offer speedy approvals and money transfers. Some lenders provide same-day payday loans. They can transfer money into your account within hours, even minutes of approval. This can be handy if you’re in a situation where you need funds urgently.

» Application process and requirements. When searching for the best online payday loans, look for an easy and convenient application process. For example, some applications take less than five minutes to complete and don’t require a lot of paperwork. Some payday loans are also easier to qualify for and may be available to bad credit borrowers.

» Transparency. Reputable lenders are honest and straightforward about how much they charge. On the other hand, some lenders might have hidden fees, so you won’t know how expensive the loan actually is. In any case, read all the terms and conditions before signing your loan contract.

» Loan management. The best payday loan companies make it easy to manage your debt, whether you need to track funds, make payments, top-up your credit, or submit a new application.

How to Get a Payday Loan Online

Generally, you’ll need to follow these steps to apply for a payday loan online.

Step 1: Shop Around And Compare

The first thing is to determine how much you need and for how long. Then compare the best online payday loans to find the lowest rate and flexible terms that suit your needs. Make sure you also meet basic requirements. You should be at least 18 years old with South African residency and a reliable monthly income. 

The easiest way to compare loans is through a comparison site like CashCrescent. You can submit one application and get multiple offers. 

Step 2: Provide Details and Documents

If you’re not applying via a third party, you’ll need to visit the lender’s website and complete the online application form. Double-check to make sure all details are accurate to fast-track your application. 

Once you accept an offer, the next step is to finalize the application by manually or electronically uploading the required documents.

Step 3: Get Cash In Your Account

If approved, the lender emails you the contract to sign online. Read the terms and conditions thoroughly before committing. Once done, the lender transfers funds into your bank account. It usually takes very little time to receive payday loan funds.