What is a payday loan in South Africa?
A payday loan refers to a short-term loan intended to give you quick access to money. The term ‘payday’ loan originates from the idea that you will pay back the loan on your payday. The loan term is usually 30 days (1 month).
The benefit of a payday loan is that you can, if approved, get money paid into your bank account fairly quickly. The huge disadvantage of a payday loan is the high-interest rates associated with these loans.
Payday loan example in South Africa
In South Africa, Mymulah is a payday loan company. You can make an application for a payday loan online. If you are approved, you could get access to the money on the same day.
With Mymulah, if you opt to apply for a loan of R4000, and your next payday is on 30 June, you will have to pay back a total amount of R4732.34. That’s a total interest of R732.34.
Mymulah has an automatic debit order that will be taken off your monthly income when you get paid.
Next month, you will need more money to cover your expenses because you have now increased your monthly expenses.
What happens if you don’t pay a payday loan?
Let’s return to the example of Mymulah. If you do not repay the loan within the specified time frame, a service fee of R60 will be imposed. In addition, you will be charged 5% interest on the outstanding balance.
You may need to take out another loan to repay the first one. Eventually, you will not be able to keep up with the payments.
What's the difference between a payday loan and a personal loan?
A payday loan usually has a shorter repayment term and often a faster application process. In both cases, however, the credit lender will perform a credit check and view your credit score before approving your application.
Moku tip: before taking on any credit, you should check out if there are any administration or initiation fees involved.
Payday loans for bad credit in South Africa
Being in a financial bind can be overwhelming. It may be tempting to use an instant loan to relieve the situation. However, this should be done with caution.
Remember a loan is a short-term solution. It could make it harder to get out of debt. Consider other options before taking out a loan.
What happens if you can't pay your debt in South Africa?
If you are in South Africa and need a payday loan to pay your debt, you are likely over-indebted. If you are already in debt, it is unwise to take out another loan. Payday loans have high interest rates which could push you further into debt.
You don’t need a payday loan, you need debt review
Debt review is a debt relief measure that can help reduce your monthly debt payments by up to 50%. We can reduce your interest rate on existing loans. This could help you save on your total debt.
How does debt review work?
One of our expert Debt Counsellors at Meerkat will conduct a financial assessment to determine if you are over-indebted. If you are, the Debt Counsellor will put together an affordable repayment plan for your debt. Instead of making several debt payments each month, you will now only make ONE reduced payment.
Did you know: more than a third of African Bank clients who have a loan, have missed months of loan repayments.
If you are struggling to make all your debt repayments, you definitely are not alone. The entire country is currently facing a cost of living crisis.
We can help you get control of your finances again.
Let us contact you about debt review. We will answer any questions you may have about the process.
Why Meerkat?
We are registered with the National Credit Regulator (NCR) and we’ve already helped thousands of South Africans get out of debt.
Read: A young family went from over-indebted to debt free thanks to Meerkat