Things sometimes go wrong in life, and you may not have money when you desperately need it. If payday is a few weeks away, a payday loan provides an easy solution. You apply online, and if you are successful, the funds are paid into your bank account within a few hours.
A payday loan is a short-term loan, so usually the full amount is repaid from your next salary. Some credit providers may allow you to pay the loan back over two or three months.
The credit provider will look at your income and expenses and decide how much to lend you. If they are responsible, they will not offer you more than you can afford to repay.
Loan amounts generally don’t exceed R8 000, although as a first-time lender you may be offered less.
Payday loans are governed by the National Credit Act (NCA), which requires the credit provider to do an affordability assessment before deciding whether to lend to you and how much. Most credit providers will also do a credit check. You must give them consent for this, and they need to provide proof if the credit bureau requests it.
To apply, you must be at least 18 years old and provide:
In addition, a credit provider may require you to have a cell phone number and request that you provide proof of residence.
If a credit check is done and you have a poor credit score, the creditor may refuse to grant you a loan. However, if no credit check is done, you can obtain a loan despite 
having a poor credit score.
You should not be granted a payday loan if you are under debt review, as this is regarded as reckless lending. If the credit provider does a credit check, they will see that you are under debt review. If they do not do a credit check, they will ask you if you are under debt review. You need to be honest with them.
A payday loan is a short term unsecured debt, so it’s expensive. The NCA specifies the fees and interest rates for these types of loans as follows:
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HOW PAYDAY LOAN COSTS ARE APPLIED
Service Fee: R57 Interest: R200 Total cost: R722 You would need to pay back R4 722 on payday. |
Some credit providers may ask you to sign a debit order form or ensure that you accept a DebiCheck mandate so they can collect the money from your bank account on payday. Others may allow you to pay via a secure online payment portal.
If you don’t pay the loan back as agreed, you may be liable for additional interest and fees. You may also face additional charges from your bank for having insufficient funds 
when the debit order is put through for payment. The credit provider may hire a debt collector to recover the debt or institute legal proceedings. All of this will damage your credit score and cost you extra money.
If you’re unable to pay the debt, be honest with the credit provider and see whether you can arrange to pay it off over a few months or roll it forward to the next payday.
You must repay your payday loan before applying for a new one. Each loan you receive is a new loan, and there is no limit as to the number of loans you can have, as long as the preceding one has been paid off. Some credit providers may grant you a higher amount for a subsequent loan if you have paid your loan promptly.
When you pay the loan on payday, you will probably immediately be out of pocket for the next month, so you may need to borrow again. This can lead you into a cycle of payday loans, month after month.
It’s also a very expensive form of credit, so if you need to borrow money, rather use a credit card or even a personal loan and pay off the debt over time with an amount that fits within your budget.
Ideally, you want to find a way out of the debt cycle, so examine your budget to see where you can trim expenses. Start an emergency fund so that you don’t have to borrow money for financial emergencies. You might also look for a side hustle or second source of income so you can repay your debts and start saving.
Initiation Fee: R465