Unsecured loans offer cashflow solutions, be aware of the problems.

Unsecured Loans in South Africa are rising in demand. They mean “big business” to the loan providers.

A few points about an Unsecured Loan –

  • Cash-strapped South Africans turn to this type of loan for quick cash solutions
  • No security needed to obtain an Unsecured Loan
  • Loan sharks are climbing in, therefore, ensure the provider is registered under the National Credit Act (NCA)
  • The NCA  affords consumer protection
  • An Unsecured Loan requires certain criteria


In 2008, the total value of this type of loan amounted to R30.8 billion. By the end of March 2016, the value of Unsecured Loans totaled R165 billion.

Currently, banks and credit providers offer Unsecured Loans up to a maximum of R230 000, repayable over seven years.

Unsecured Loans in South Africa – Two major Issues to Consider

An unsecured loan is a personal loan because the borrower provides no financial security to gain access to quick cash. Unfortunately, many cash-strapped consumers will often overlook the high cost of interest rate repayments in exchange for cash in hand.

However, the relative ease of access to an Unsecured Loan has created two major problems.

Unsecured loans in South AfricaFirstly, many small micro-lending companies tend to be less than honest and secondly, it acts as a catalyst for debt growth. South Africa is a “Nation in debt” because of this.

Commercial banks hold about 84% of all unsecured loan contracts in South Africa, according to the National Credit Regulator (NCR).

Explanation of an Unsecured Loan –

For an Unsecured Loan, you do not have to cede policies or put your home on the line to get cash. Lenders don’t need any assets to access cash funds.

This is the reason that interest rates applied to Unsecured Loans are higher than on a loan where you provide security.

Beware loan Sharks

Before applying for an Unsecured Loan, you should ensure that the lending company works within the framework of the National Credit Act (NCA) and is registered with the NCR.

This will side step the danger of borrowing cash from loan sharks whose shady ethics have seen thousands of people, mostly the uneducated, being fleeced in terms of interest rate charges. It is a known fact that, despite Government clamp-downs, there are still many lenders working under the radar.

Banks, on the other hand, have to abide by the new interest rates for Unsecured Loans, these are capped at the current repo rate of 6.75% PLUS 21%. Previously, banks were charging up to 32.65% and the cutback in interest charges has seen a downward spiral in their lending rate.

This, in turn, has led many borrowers down the loan shark path. If you are uncertain about the status of a lender you should contact the NCR before taking out a contract with the firm.

What is the NCA?

Launched in 2007 to regulate the credit lenders, the National Credit Act (NCA) was recently amended to close loopholes and provide better protection for people.

The major amendment to the NCA was the capping of interest rates that applied to the various loans offered on the South African market. This became effective in May 2016.

Revised capped Interest rates Are:

  • Unsecured credit: Repo rate + 21% per annum = 27.75%
  • Mortgage (home loans): Repo rate + 12% per annum = 18.75%
  • Credit (credit cards and store cards): Repo rate + 14% per annum = 20.75%
  • Developmental credit: Repo rate + 27% per annum = 33.75%
  • Incidental credit: Example, if you are late paying your chemist bill, you can be charged interest at 2% per month
  • Other credit agreements: Repo rate + 17% per annum = 23.75%
  • Short-term buying: 5% monthly on the first loan and 3% monthly on any subsequent loans within one year
  • The service fee that may be applied to credit agreements has increased from R50 to R60 monthly (excluding VAT)
  • Initiation fee on home loans: R1 100 plus 10% of an amount in excess of R10 000, capped at R5 250 maximum
  • Initiation fee on credit cards and store cards, short-term credit and personal loans: R165 plus 10% of an amount in excess of R1 000, capped at R1 050
  • Start up fee on development credit for small businesses: R275 plus 10% of an amount in excess of R1 000, capped at R2 600
  • Fee on development credit for low-income housing: R550 plus 10% on an amount in excess of R1 000, capped at R2 600

*The repo rate is the interest rate at which the SA Reserve Bank lends money to commercial banks

Qualification criteria For Unsecured loans in South Africa

Borrowers now have to supply credit providers with the following information:

  • Payslips for the last three months or
  • Three months bank statements reflecting salary deposits or
  • Current financial statements or
  • Documented proof of income


In turn, the lending company will:

  • Work out your gross income
  • Decide what are your minimum living expenses
  • Consider all your debt obligations
  • Arrive at an income amount which is the amount left over to repay the loan. This must be less than the new loan repayment amount


Because of the new rules, many people who fail to meet the criteria will be tempted to seek loans from loan sharks.

Unsecured loans in South Africa – Overview

South Africa has a consumer-driven economy and access to credit is important. This is very true today as the cost of living goes up every month. Consumers are under pressure to keep their heads above water.

It is a fact of life that everyone faces cash flow problems. Like needing a new set of tyres or having to pay for unforeseen medical expenses. At these times access to Unsecured Loans may be the only solution.

Also, one in five South Africans who are credit-active is in arrears with their debt repayments. This situation, however, is easily avoided with careful financial planning.

People should have access to Unsecured loans in South Africa provided they live within their financial means.

Next step: Apply for a loan now, just fill in the form. Then submit it!

All info was correct at time of publishing