Apply For Micro Loans Online In South Africa

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Micro loans can be a perfect solution if you need short-term access to extra cash. There are many instances where you might need to borrow a small amount of money.

Read our quick guide to help you understand how this type of loan works.

RandWallet can help you find micro loans online in South Africa. Apply now below.

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Table of Contents

What Is a Microloan?

If you check the dictionary, micro means extremely small, so this type of loan involves small amounts of money. There are two options to consider.

Consumption Loan

Consumption loans are available from moneylenders. In the beginning, these loans were designed to make credit more accessible to low-income households.

However, micro loans also come with certain disadvantages. They’re known for their exorbitant interest rates, which can easily trap poor individuals in a vicious cycle of debt.

Mashonisas are the most popular type of lender in low-income areas. These loan sharks are known for offering high-risk loans because they don’t run credit or affordability checks.

In other words, they give loans regardless of whether the borrower can afford it or not. They also charge excessive interest to make the situation worse.

Consumption loans can be helpful when faced with an urgent financial situation. But you must be sure you’re dealing with an actual emergency, such as a car breakdown, funeral, medical emergency or anything that requires immediate action. In addition, be sure to only work with trusted registered credit providers.

Commercial Loans

Some microfinance institutions provide entrepreneurial assistance and capital in the form of small-rand loans. Again, the financial service is available to entrepreneurs and startups who would otherwise have no access to finance.

Commercial micro loans appear more beneficial than consumption loans because they empower the borrower with the ability to repay the loan.

For example, if a disciplined and focused individual receives a small entrepreneurial loan to start and grow their business, they can generate more revenue and be able to afford repayments.

Hence, commercial micro lenders can offer a valuable service that fosters development in South Africa’s poorest local communities.

The best microfinance institutions (MFIs) provide training and support to help entrepreneurs develop knowledge and skills. This ensures sustainable income-generating microenterprises and high repayment rates.

How Do These Loans Work in South Africa?

Micro Finance South Africa (MFSA) is the representative body of registered and legal Microfinance Credit Providers in South Africa.

The organisation currently has 1400+ institutions registered with the National Credit Regulator in accordance with the National Credit Act. These lenders offer credit in rural, semi-urban, and urban areas nationwide.

Generally, this type of credit work like other cash loans in South Africa. You get money, and then you pay it back with interest and fees over a certain period of time. Details vary from lender to lender, but most microloans share the following features:

Unsecured credit. These loans are easy to get because you can get a small amount of money without collateral to secure the loan.
Maximum loan amounts. Most options are available up to R8000.
Interest rates. Interest rates are normally high because they’re meant for high-risk borrowers. APRs can be as high as 60%.
Repayment terms. These loans are short term loans and 6 months is often the maximum term.
Flexible requirements. These loans are designed for people who have trouble qualifying for traditional or regular loans, for example, startup business owners and people with low credit scores.

Online Loans

Online micro cash loans in South Africa are now conveniently available, and borrowers have many options to consider. Consumption loans are more commonly available to individuals needing short-term finance for pressing situations.

Instant Loans

Looking for instant online micro loans in South Africa? These are usually available from payday lenders. These loans are perfect when you need money urgently. Microfinance institutions have faster approvals and loan processing times than regular banks or lenders.

Same Day Loans

People looking for urgent loans can also apply for same-day micro loans online. These loans allow you to get cash on the same day you apply. Most lenders require you to apply during business hours and will disburse funds if your application is approved within a specific time frame.

Personal Loans

The majority of microloans are from payday lenders. However, personal loan lenders may also offer loans from R2000. These loans are usually difficult to get because most personal loan lenders don’t offer small loans and have stricter requirements.

Bad Credit Loans

There are also micro loans in South Africa for bad credit borrowers. Someone with bad credit can qualify for a small loan amount if their current income can accommodate the repayment.

Bad credit microloans may be the only available option to people with a low score. However, they should be considered an option of last resort because of the high interest rates.

Pros and Cons of Microloans

Consider the advantages and disadvantages of this type of loan to help you decide if they’re right for you.

PROS

Easy online application. One of the biggest benefits of these loans is that they’re easily available. Lenders have developed easy-to-use online platforms, and you can apply online on your phone within minutes.
Flexible eligibility requirements. This type of credit is typically available to people in underserved communities, such as low-income earners, bad credit borrowers, startups, and businesses. This group often has trouble getting loans from regular lenders and traditional finance institutions.
Quick funding. Lenders offer instant micro loans in South Africa with quick approvals and fast funding. This can be a lifesaver for people who need extra cash urgently.

CONS

Limited loan amounts. Only small loan amounts are available. Hence, this type of loan might not be suitable if you want to achieve a large goal, make a major purchase, or cover anything that requires a substantial sum of money.
Limited repayment terms. These loans also have shorter repayment terms compared to traditional loan options. Some people may struggle to pay back the money quickly, and defaulting can trigger steep late payment penalties, such as additional interest and expensive fees.
Higher interest rates. Private lenders and microcredit institutions in South Africa are notorious for charging high interest rates. Since these loans are easily accessible, borrowers are at risk of being caught up in a debt trap.

How to Find the Best Micro Loans

With so many options, it’s worth your while to compare what’s currently available. The best micro loans in South Africa are available from registered credit providers.

They offer flexible eligibility requirements, high approval rates, and fast funding speeds. The best option for you is whatever suits your needs.

Don’t just settle for the first option you come across, compare several loan offers before deciding. Look for the most competitive rates and terms to ensure you get the best deal.

Apply for Micro Loans Online in South Africa

First, check that you qualify. You need to be at least 18 years old with a valid South African ID and a reliable monthly income. Here’s how it generally works when applying online.

Fill out the easy online application form. RandWallet will connect you to an industry-leading panel of lenders that match your needs.
Check your loan offers – compare and review to see which option works best for you.
Once approved, sign the loan agreement and get money in your bank account.

Frequently Asked Questions

What is the interest rate for micro loans in South Africa?

Micro loans in South Africa are frequently available from payday lenders and loan sharks. These providers charge APRs as high as 60%.

Is a micro loan the same as a personal loan?

Micro loans are small, short term, and unsecured loans. They can be payday or personal loans but are more readily available from payday lenders. Personal loans have high minimum amounts, so it may be difficult to get a small loan from traditional lenders.

For example, some personal loan lenders only offer loans starting from R5 0000 or R10 000. On the other hand, payday loans offer amounts as low as R500.

Are micro loans a good idea?

Microloans have high interest rates, but micro debt can be managed if the money is used wisely. For example, it’s best to use a microloan for actual, short-term emergencies.

It’s also your responsibility to understand how much your loans will cost you and to borrow only an amount you can afford. Repay the loan in the shortest time possible to minimise borrowing costs.

Our Research Expert

Gracie Makowe

Gracie Makowe is a full-time personal finance writer with 10 years of experience and a Bachelor of Commerce in Financial Management from UNISA. Learn more.