A loan is a big decision, and it's easy to get it wrong. These are the mistakes that cost South Africans the most – and how to avoid them.
1. Accepting the first offer
The difference between the best and worst offer can be several percentage points – thousands of rands over the term.
Solution: Compare offers from several lenders at once with Lendova. It's free.
2. Only looking at the monthly instalment
R100 000 at 22% per year (incl. fees):
- 36 months: R3,934/month – total R141,630
- 72 months: R2,612/month – total R188,061
Solution: The lower instalment costs R46,431 extra. Choose the shortest term you can afford.
3. Ignoring fees and credit life insurance
Initiation fees, service fees and insurance are added on top of the interest.
Solution: Compare the total cost of credit in the quotation, and ask to use your own credit life policy.
4. Borrowing more than you need
Solution: Work out exactly what you need. A smaller loan is cheaper and easier to get approved.
5. Using short-term loans for long-term needs
Taking a new payday loan every month to cover the last one quickly becomes a debt spiral.
Solution: For bigger or longer needs, a personal loan at a lower rate is usually much cheaper.
6. Borrowing from loan sharks or unregistered lenders
Mashonisas and unregistered lenders operate outside the law. Warning signs:
- They ask for a fee before paying out the loan
- They want to keep your bank card, PIN or ID – which is illegal
- They have no NCR registration number (NCRCP)
- They promise approval with "no credit check"
Solution: Only deal with NCR-registered lenders – you can check on the NCR's website.
7. Not planning your repayments
Solution: Make a budget, set your debit order for just after payday, and contact your lender immediately if you can't pay.
Checklist before you sign
- I've compared offers from several lenders
- I know the total cost of credit, not just the instalment
- I'm borrowing only what I need
- The lender is registered with the NCR
- I've read the pre-agreement statement and quotation