A personal loan can help to kickstart you into financial success, and it can also be a lifeline when you’re faced with a sudden financial emergency.
In this post, we’re going to give you the inside scoop on how to find the best lowest interest rate personal loan available in South Africa.
Let’s start by taking an in-depth look at rates and percentages that affect the interest on personal loans.
Repo interest rates, prime plus interest rates… and how they affect your personal loan.
Many personal loan providers state their interest percentage as “prime plus” or “prime +(amount)”. Here’s what this is all about.
The repo rate is set by the South African reserve bank.
Companies and institutions that lend money must borrow it themselves from the South African Reserve Bank (SARB). It’s SARB’s task to help manage our economy, and one of the ways they do this is by raising and lowering their interest rates, depending on the country’s current financial state. A repo rate is the interest rate that SARB charges on its money.
The prime plus rate is set by your money lender.
Many companies that lend money don’t offer a fixed rate. Instead, their rates are a percentage on top of the current repo rate. This is known as a prime plus. Your money lender’s own interest rate may not fluctuate during the duration of your loan repayments, but the repo rate may, which can affect the interest rate you end up paying.
So what’s up with APR?
Most lenders state their interest rate as an APR, or annual percentage rate. Confusingly, this may work out to be different from the repo rate added to your plus prime rate. This is because any fees you may be paying for taking out the loan are included in your APR. Essentially, your APR is the amount of interest you must pay a year stated as a percentage, and it’s the actual interest rate plus any fees.
How to qualify for the lowest interest rate personal loans in South Africa
Higher risk equals higher interest rates. For a money lender to feel comfortable with offering you their lowest interest rates, you have to prove that you handle loans responsibly. Here are some ways you can do that.
- Always pay up on time. Paying what you owe, such as rent or an amount you racked up on a store card, on or before the due date helps to prove that you can be trusted to pay back your personal loan in a timely fashion.
- Sort out any outstanding debt problems before opening new loans. If you’ve defaulted on a debt, or have an existing judgment granted in court, your loan application may be rejected instantly.
- Get a handle on current debt. If you’ve already paid off a lot of your existing debt, your bank will estimate that you’re more likely to be able to afford a new loan.
- Keep a clear record of your current expenses. To prove you’re an upstanding customer, provide your lender with records like payslips and bank statements, so that they can verify your income and expenses.
- Don’t apply for a loan if you’re not certain you’ll get it. If your request for a personal loan has been denied in the past, it may raise doubts about your credit history.
Now that you know how interest rates work, and how to guarantee that you land the best interest rate available, let’s look at our favorite personal loan providers and what they offer.
These banks have the lowest interest rate personal loans in South Africa.
ABSA guarantees an excellent personal loan deal. In fact, if you qualify for a better interest rate elsewhere… they’ll beat it.
Here’s what you need to know about taking out a personal loan with ABSA:
- Their APR is prime +17,5% or lower.
- You can take between 12 and 84 months to repay your loan.
- You can borrow up to R350 000.
- To qualify, you need to be 18 years of age or over, earn at least R2000 a month, and have a bank account that your income is paid into.
- If you’re already a customer, you might pre-qualify for the loan.
FNB offers some thoughtful additions to their personal loan packages.
Here’s what you need to know about taking out a personal loan with FNB:
- Your prime interest rate may be as low as +13%.
- You can take between 1 and 60 months to repay your loan.
- You can borrow between R1000 and R300 000.
- If you’re up-to-date on repayments and your loan is older than 6 months, you can take a break from repayments in January.
- There won’t be any penalty fee if you settle your loan early.
- To qualify, you need to be between 18 and 64 years of age, a permanent resident of South Africa, employed (self-employment counts), and must pay your salary directly into your bank account
African Bank is a well-loved personal loan provider in South Africa.
Here’s what you need to know about taking out a personal loan with African Bank:
- Their APR is between 15% and 27,5%.
- You can take between 7 and 72 months to repay your loan.
- You can borrow up to R250 000.
- You can pick a month where you take a break from repayments.
- To qualify, you need to be 18 or over and have a recent proof of income and bank statement that reflect three salary deposits.
Capitec is another favorite personal loan provider. They have all their rates and fees clearly laid out in a chart that can help you pick which package best suits your needs.
Here’s what you need to know about taking out a personal loan with Capitec:
- Their interest rates are as low as 12,9%.
- You can take between 1 and 84 months to repay your loan.
- You can borrow up to R250 000.
- It’s easy to add affordable loan insurance.
- To qualify, you need to be 18 years of age or over and bring a bank statement showing your latest three consecutive salary deposits into an account in your name.
Before you take out a personal loan…
Taking out a loan is a commitment and paying it off requires sacrifice and discipline. Here’s how you can make your loan repayments easier to manage.
- Take out a single personal loan at a time.
- Budget before you even enter the bank, so you have a plan that you know you can stick to.
- Write up an all-inclusive budget for every month while you’re paying back the loan, to help you stick to your goals.
- Avoid going to places where you know you’ll be tempted to spend extra.
- Speak to friends and family members about your situation so that they understand the financial expectations they can have of you. They may even offer to help out with accommodation or the occasional grocery shopping spree!