Money Advice

7 best ways to use a personal loan in South Africa

Published by
Lethabo Ntsoane

A personal loan comes with a very high-interest rate that can go as high as 17.5% + prime lending rate. Given the interest that must be paid for this type of credit, one must exercise greater caution when spending on a personal loan. Going on a shopping spree or taking a random vacation should not be something you use your personal loan for.

Repaying the loan will be difficult; missed payments will result in higher interest charges because interest is capitalized on this type of credit. Instead, use a personal loan for things that are more meaningful and valuable to your life and future.

There are other types of credit available to you if you need money to buy groceries or furniture. Rateweb has identified the seven best use cases for personal loans based on the data that we have gathered.

During our research, we discovered how people misuse personal loans by using them to purchase goods and services that they should never have purchased with a personal loan in the first place. Our list is based on the following criteria:

  • The worth of the expense on which the credit is spent,
  • The future worth of a sum of money spent on such an expense.
  • There is no direct lending instrument available for the listed expense.
  • The effect of the expense on your future income and/or life.

The 7 things to spend a personal loan on are:

Medical Expenses

Since you’re taking credit, you don’t have enough money to cover your medical expenses. We’ve established that medical expenses are critical and should be addressed with a personal loan sometimes. Even for those who have medical aid, long hospital stays can be expensive, requiring a high excess fee in the process.

Using a personal loan to cover your medical expenses is not a bad idea at all. Personal loans have a borrowing limit of R300,000, and having such money in your bank account can be a game-changer and morale booster during your hospital stay.

It won’t make sense to die because you didn’t want to take out a personal loan and be taken to an inferior hospital instead. You are the best investment you can ever make, and betting on yourself should be something you do without hesitation, so taking out a personal loan should be a no-brainer. 

Debt Consolidation

This expenditure makes a lot of sense. It is ideal to consolidate all of your debts by paying them off with a much lower cost loan. It not only has monetary benefits, but it also has an effect on your credit record. Instead of having multiple open accounts on your credit profile, you will now only have one.

Using a personal loan to consolidate your debts must be done correctly and carefully. First and foremost, your credit record must be in good standing in order for you to obtain better interest rates than you currently have with other lenders. Second, an increase in income may enable you to obtain even better terms on the new loan.

Home repairs and additions

Home repairs and additions can increase the value of a property. Spending money to improve one’s home is the most sensible investment one can make. According to Experian customer data, 17 % of borrowers use personal loan funds for home improvements.

We’ve discovered that improvements to income property provide more benefits. Since it will be fitted with new furnishings and repaired to a higher standard, the property will be able to earn more money. Rent for the house can easily increase by 10%, allowing you to repay the personal loan much faster.

An Emergency

Even if you save money on a monthly or periodic basis, the funds can be depleted. We have seen how Covid-19 has drained the savings of working South Africans who had to cover expenses such as rent, groceries, medical insurance, and more from their savings.

A personal loan can assist you in dealing with emergencies such as Covid-19, in the process allowing you to look for a new job or deal with any other personal emergency without feeling desperate. Emergencies do not include anything enjoyable, but rather something that you cannot live without.

Major Life Changes

Moving from one city to another, changing careers, getting divorced, and other major life changes are examples of major life changes. These changes are not cheap; there are financial costs associated with them. A divorce will require the hiring of a lawyer, who will be paid until the case is resolved.

A personal loan will assist you in smoothing the transition to the next stage of your life. Since these are considered emergencies, money can be obtained in a matter of days, if not hours, if you use a much faster lender.

Larger Purchases

Store credit also has high-interest rates, and the interest due can sometimes be higher than that of a personal loan. A personal loan can be used to purchase items in bulk, such as furniture for a home, new kitchen appliances, or other items.

As you’ll be using money to make purchases when you use a personal loan, you will be able to shop at a variety of stores. Items on sale can be targeted from various stores, allowing you to save a lot of money in the process.

Starting a Business

If you have a job and know you will be able to repay the personal loan, one option is to borrow to start a small business. It will be a huge risk, but it may be worthwhile if you know exactly what you’re doing.

Taking a personal loan and using it for your new business can aid in the payment of expenses. If you are successful in your business, you will be able to quit your job, earn more money, and have a business to run.


Personal loans are a type of financing that can be leveraged by using them where they are most needed. Personal loans have high-interest rates and should not be abused or used for frivolous purchases.

Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted at

Published by
Lethabo Ntsoane

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