Updated 23.02.2023

Loans for Bad Credit

Many people in South Africa are looking for loans for bad credit. The effects of COVID-19 are still being felt in South Africa. The pandemic has left most South Africans jobless and others underemployed. This means that there is less money circulating in the country. Lack of money has led to bad credit records for people who took a loan and later defaulted after lacking money to pay off the debts.

Besides the poor credit ratings caused by the pandemic crisis, some people still had poor credit ratings before the pandemic. Many South Africans realize they have a poor credit score when they apply for their first loan. But the good news is that you can still qualify for a loan even when you boast of a poor credit score history.

What Is A Bad Credit Record?

Anytime you apply for a loan, the bank or credit company checks your credit report from the SARS approving any type of loan product. The credit report shows your payment behavior after taking a loan. It highlights the amount of money you borrowed, how much you paid back and how much you defaulted. It also shows how long you took to pay the loan. However, many reasons can land you into bad credit, including:

  • Bankruptcy
  • Late repayment
  • Court judgement
  • Missed payments

How to Get find Loans for Bad Credit?

Getting a bad credit loan in South Africa is a fairly easy process. However, it needs you to do a lot of research and list the most affordable banks and creditors. To achieve this, you must:

Check Your Credit Score

The SARS allows you to check your credit report at least once a year. Your credit report does not show your credit score. If you want the information of your credit score, you can confirm with your financial institution. Note that your credit score does not mean you have a poor credit report. It highlights the amount of money you can borrow from a financial institution.

Confirm that You Can Make the Payments

You can evaluate your monthly income to find out how much you can afford to borrow and repay. The rule of thumb is that you should only borrow what you can afford to repay. Ensure that you have enough income every month that you can meet the monthly payments and cater to all other expenses. 

Compare Best Bad Credit Personal Loans

If you have an account with any South African bank and have never taken a loan or defaulted on any, you can ask for a personal loan. If you have a poor credit rating, you can research loans for people with bad credit.

Consider Pre-qualified Loans

Many financial institutions in South Africa allow you to pre-qualify for a loan even with a bad credit score. Some do not have credit checks and can give you a loan anytime you want but with high-interest rates.

Consider Secured Loans

If you cannot access an unsecured loan because of your poor credit history, you can apply for a secured loan. This means you have to back up your loan with an asset such as a car, piece of land, depending on the amount of loan you borrow and the lender’s requirements.

Add a Guarantor

Many banks in South Africa and credit lenders ask you to provide two or more co-signers when borrowing a loan when you boast a poor credit score or history. The guarantors or co-signers have to have good credit history and are probably financially stable. These are the people whom the lender can call to repay your loan when you default.

Get Ready for a Credit Check

Although many online lenders and some banks pre-qualify you for a loan, they still go back to your credit history to check your credit score. This can damage your borrowing plans. That is why research and proper enquiries are important before seeking long-term or short-term loans with bad credit loans guaranteed approval in South Africa.

Effects Of COVID-19 On Bad Credit Loans

COVID-19 pandemic has created economic and financial stability havoc in South Africa. Although the government has established measures, such as the COVID-19 Loan Guarantee Scheme, to help poor South Africans with some monthly stimulus payments, it is not enough to minimise the hardship of people with poor credit.

The pandemic has caused banks and lenders in the country to adjust their loan offerings. Although the government has instructed banks and online lenders to waive some fees to personal loan borrowers, prospective borrowers are facing major hurdles than before as creditors try to minimize risk.

The ones ready to risk their cash are offering loans at very high-interest rates. That means that borrowers with bad credit have limited borrowing options thanks to the COVID-19 financial crisis. The good thing is that the high-interest rates charged for unsecured loans keep borrowers away, and only a few who can afford to repay the money qualify for the loans.

If one lender turns you down, another one will accept your request. So, if you boast a poor credit history, do proper research of banks willing to offer a bad credit personal loan in South Africa and get yourself a bank that will ease your borrowing troubles and offer you a loan. Take advantage of pre-qualified loans and settle all your bills and expenses in due time.

Factors for Choosing the Best Bad Credit Loan Firms

Everyone has what they term as a bad credit loan, and what may work for you may not work for another person. However, there are a few factors that determine how good a bad credit company is. They include:

Interest Rates and Additional Fees

Different lenders boast different interest rates. That is why it is crucial to analyze different bad credit lenders before applying for a loan. Compare their interest rates and additional fees and choose the one with the lowest. Also, consider the amount of penalty charged for late payment.

Type of Lender

Various financial institutions in South Africa offer debt consolidation loans. They range from online lenders, banks to credit unions. Online lenders allow you to apply for instant loans online without security. They are perilous but have high interest rates. Bank bad loans and credit unions require you to visit their nearest branches and apply for the loan physically. However, some banks have digitized and allowed you to apply for personal loans online but later submit some original documents to your nearest branch.

Period of Time and Repayment Condition

Different bad loan lenders boast different repayment terms depending on the amount of money borrowed. The most common duration runs from 6 months to five years, with a few lenders extending up to 8 years.

Eligibility Requirements

Many lenders list a couple of things that they need from you on the website to qualify for a loan. It is wise to carefully go through the eligibility requirements to see if you qualify to borrow a loan from them. Some of these requirements include credit score, maximum debt to income ratio and minimum income.

Some of the most known bad credit loan providers in South Africa include:

Types of Bad Credit Loans in South Africa

South African creditors offer borrowers two main types of bad credit loans that include secured and unsecured loans.

Secured Loans

Secured loans require you to provide collateral before the lender gives you a cash loan. The collateral can take the form of a house, car or title deed. South Africans who borrow secured loans get favourable rates with higher loan limits to complete a big project. Collateral makes it easy for you to gain a loan when you boast a bad credit history. However, this kind of loan is risky because once you default repayments, the bank legally auctions your assets to recover their money.

Unsecured Loans

Unsecured loan does not require the borrower to provide any security to the lender. It is a risky business for the lender since the borrower can easily default payment and the lender ends up losing their money. However, unsecured loan lenders charge high-interest rates to the borrowers due to them being high risk loans.

Sometimes, you may not qualify for the traditional bad credit loan but worry not. There are other types of personal loans you can borrow, such as

Students Loans for Poor Credit

A student loan allows you to take a loan from various banks in South Africa for your college or university tuition and other school expenses. So, if you need a bad credit loan for your education, approach your favourite bank in South Africa and submit your admission letter. The bank will give you a substantial loan until you graduate and start repaying.

Home Equity Loans for Poor Credit

Home equity loans for poor credit resemble secured personal loans, although they send you upfront. The lender allows you to repay the money in fixed monthly instalments. The lender uses your home as security, and anytime you default payment, the bank seizes your home and auctions it to recover their money. This kind of loan comes at a lower interest rate compared to other bad credit loans.

Payday Loan

Payday loans are a short-term loan that involve smaller amounts of money. The loans attract high-interest rates with additional charges because they are quick loans into your bank account. Sometimes known as online loans as the application form is often an online form that can be filled out quickly and easily. The bank deducts repayment from your deposit account every month until the lender recovers their total amount.

Although payday loans can save you on a rainy day, they can easily lead you to a pit of constant debts. Because once you pay your previous loan, the lender entices you with a better offer which you can always borrow instantly for emergency cases.

Requirement for Qualifications for Loans for Bad Credit

For you to qualify for a bad credit loan in South Africa, you:

  • Must boast South African citizenship with an ID
  • Must have attained 18+ years
  • Have a monthly income not less than R 3,000.00

Besides these, you need to submit an original national ID, bank statements and proof of address. However, if you are bankrupt and don’t meet the following requirements, the bank cannot give you a loan.

What to Consider Before Taking A Bad Credit Loan

Bad credit loans are expensive for South Africans. So, before borrowing this kind of loan, try to consider any other options, such as borrowing from family or friends. Also, speak to your lender to see if you can agree to a low-interest rate loan. Ensure that bad credit loans are your lender of last resort.

As earlier mentioned, pay bad credit loans as quickly as possible to avoid escalated interests and penalties. Also, if you take a secured bad credit loan, ensure that you can meet the loan repayments and do not default payments because the lender will take action on your assets to recover money borrowed.

Apply for only one bad credit loan. Taking multiple loan funds from different financial providers can damage your credit score when you default payments. This can make it difficult for you to borrow a loan from other financial institutions in the future.

How to Spot Fake Loans for Bad Credit

With the current economic crisis in South Africa and people hungry for money, hundreds of fake bad credit loans providers in the country. Most of them ask you for a registration fee, which you can easily fall prey to when you are desperate for a loan. However, various red flags highlight fake bad credit loans. They include:

Poor Advertising Techniques

You may come across unknown phone calls and home visitations from various credit lenders. Some pressurize you to take a loan with them without security. Note that this is not a legitimate advertising method, and if they easily sway you, you can fall into a trap and lose a lot of money in the long run.


Fake bad creditors ask for an upfront application and appraisal fee, yet in normal cases, a genuine lender deducts it from your loan after the application approval. If you come across lenders asking for upfront fees, beware that they are fake.

No Physical Address

There are many bad loan lenders with online an email and no physical address on their websites. These are scams because regardless of working online, they should boast at least one office in a specific location. If they only provide an email address for contact this should raise red flags.

Unsecured Websites

When researching bad credit loans in South Africa, you might have come across some lender’s websites without a “https” and a padlock feature for seeking personal information. This is one of the red flags for malicious scammers who are out there to tell you the little you have in desperate times.

Zero Approvals

Most lenders in South Africa are interested in knowing your credit score, credit report, income and nationality. If a lender does not ask you for this kind of information, they are scammers and want to lure you into a bad situation.

No State Credit Registration

The South African National Credit provider requires the registration of all creditors in the country where they run their business. If your research does not show the registration of a lender with the body or even show that they follow the SARS terms and conditions, they are scammers.

Advantages and Disadvantages of Bad Credit Loans

Bad credit loans have many benefits when used with care and cons when used inappropriately.

The advantages include:

Quick Cash

Bad credit loans come through when you have an emergency, such as pending electricity and medical bills. You can quickly apply for a loan online with a few documents and requirements that you provide online. The lenders provide you with the cash in a few minutes or hours after application.

Credit Building

If you take a loan and repay on time, you build up your credit score and become eligible for higher loan amounts and a longer loan term in the future. Loan approval is likely to become a faster and smoother process.

The disadvantages include:

High Interest Rates

Lenders risk big when lending you money. So, they charge very high-interest rates when the loan is unsecured. That means you end up paying more than what you borrowed.

Additional Fees

A series of fees deducted from the borrowed loan amount accompanies bad credit loans. Your lender may charge you:

  • Original fees for processing your loan application
  • Late payment fees when you don’t pay your loan on time

Collateral Requirement

A bad credit loan that requires you to provide collateral is a high risk, especially when you have a poor credit history. You risk your assets from auctioning by your lender when you default on payment.

Automatic Bank Credits

If you get a bad credit loan from a bank, note that the lender always deducts their money from your monthly deposits from your account. You have no control over your loan getting credited, since that is the agreement you made with the bank when taking a loan. That means you will have less money in the bank for doing other things.


Bad credit loans are fast and flexible, and they can easily lead you to a series of debts. Every time you require money, you take a bad credit loan, even when it is not an emergency case. That means you always have a debt tag from some lenders.

Bad credit loans are readily available to any South African citizen. You are still eligible for a loan even when you boast a poor credit history or score. Now that you have ample information about bad credit loans in South Africa, you can borrow some or stay away from them.