What counts as a small loan
There is no legal category called a small loan. What the law does define is short-term credit: a loan of up to R8 000 that must be repaid within six months. Almost every loan of R500 to R5 000 falls inside that line, so the same rules apply whether you borrow R500 for a taxi fare or R5 000 for a car repair.
Short-term credit has its own caps. Interest may be at most 5% a month on the first such loan you take in a calendar year and 3% a month on later ones. On top of that a lender may charge an initiation fee of at most R165 plus 10% of the amount above R1 000, and a service fee of at most R60 a month, with VAT on the fees.
What R500, R1 000, R2 000 and R5 000 may cost
These are the legal maximums for one month, worked out by our loan cost calculator: on R500 the interest, fees and VAT may total R283.41; on R1 000, R308.07; on R2 000, R472.38; on R5 000, R965.33. Spread over three months the maximum on R2 000 rises to R807.64 and on R5 000 to R1 596.48, because interest and the service fee run for longer.
Two things stand out. On a very small loan the fees take a large share of the cost, so borrowing R500 twice costs more than borrowing R1 000 once. And a longer term lowers what you pay each month but raises the total. Real offers are often below these ceilings; the quotation a lender must give you before you sign shows the exact rand amounts.
Who lends small amounts, and how much at first
Most registered short-term lenders in South Africa start at R500. Many cap a first loan at R4 000 or R5 000 and raise the limit for customers who repaid on time, up to R8 000 with some. A lender may also offer you less than you asked for: the amount follows from its affordability check, not from the form.
Expect to be asked for a South African ID and your latest three months' bank statements, usually shared through the lender's site or uploaded as a PDF. Several lenders accept statements instead of a payslip, which helps people paid weekly, on commission or for their own work. Every lender also checks your credit record when you apply.
The list on this page shows registered lenders with their NCR numbers. Four short questions narrow it to the ones whose own rules fit your amount, income and situation, so you apply where you have a chance instead of collecting declines and credit enquiries.
One payment or instalments
Some small loans are repaid in one payment on your next payday, by a debit order set to your salary date. Others are spread over two to six monthly instalments. One payment costs less in total, but it takes a large bite out of a single salary; instalments are easier to carry and cost more because the loan runs longer.
Pick the shape your budget can survive. If repaying R2 000 in one go would leave you short again before the next month-end, a three-month term is likely to cost less in the end than a second loan to cover the gap.
Keeping a small loan small
The real risk of a small loan is not the first one but the next. Rolling a loan over, or taking a new one to repay the old, adds a new initiation fee and more interest while the debt stays the same. If you can see that you will not manage the repayment, ask the lender for an arrangement before the debit order runs.
Before you borrow at all, check the options that cost nothing: a payment arrangement with your landlord, school or municipality, an advance from your employer, or your stokvel. And never pay anyone to release a loan. The National Credit Regulator warns that upfront payments for a loan are unlawful; a registered lender takes its fees out of the loan or adds them to the repayment, never in advance.