A term loan is a financial agreement where a lender provides a borrower with a specific amount of money upfront, and the borrower agrees to repay the loan over a predetermined period with interest. These loans can last between one and ten years, sometimes extending up to 30 years for specific loans like mortgages. They can be used for various purposes, such as expanding operations, leasing new space, purchasing equipment, or increasing inventory.

Term loans can be categorized as short-term, intermediate-term, or long-term, each suited to different financial goals and repayment capabilities. Short-term loans are best for immediate, smaller-scale financial needs, while intermediate-term loans support significant investments. Long-term loans provide substantial funding over three to 25 years, ideal for significant expansions or purchasing high-value assets like real estate. Qualifying for a term loan requires a solid credit history, stable cash flow, and collateral.

Main benefits of term loans

Term loans, especially long-term personal loans, offer several benefits that can significantly impact an individual’s financial planning and goal achievement. Before jumping into the specific advantages, it’s essential to understand that long-term personal loans are designed to be repaid over several years, providing a considerable sum that can be used for various purposes, from home renovations to education expenses. These loans often come with the option for more manageable monthly payments, compared to their short-term counterparts, due to the extended repayment period​​.

Here are some of the top benefits of term loans:


Manageable monthly payments

One of the primary benefits of a long-term personal loan is the distribution of the loan repayment over an extended period. This approach results in lower monthly payments, making it easier for borrowers to manage their monthly budgets without significant strain​​.

Flexibility in use

Unlike specialized loans that are intended for a specific purpose, such as home loans or car loans, term loans offer the flexibility to use the funds as the borrower sees fit. This could be for consolidating debt, financing a large purchase, or covering unexpected expenses​​.

High financing percentage

For home loans, in particular, borrowers can access financing of up to 90% of the property’s value. This high financing percentage reduces the need for a large upfront deposit, making it easier for individuals and families to finance home purchases or refinancing existing mortgages​​.

Extended repayment period

Term loans, especially home loans, can offer repayment periods of up to 30 years. This longer repayment schedule allows for more affordable repayments, making it easier to manage long-term financial commitments​​.

Credit building

Regular, on-time payments of term loans can help borrowers build or improve their credit score over time. A higher credit score can open up opportunities for better interest rates and terms on future loans and credit​​​​.

Interest rate options

Borrowers have the option to choose between fixed and variable interest rates depending on their financial stability and risk tolerance. Fixed rates offer predictability over the loan term, while variable rates can potentially offer lower interest costs when market rates are favorable​​.

Loan simulation

The monthly repayment can be calculated as follows: Add the total interest to the loan amount and then divide by the number of months. Assuming a fixed annual interest rate, you would first determine the total interest in applying the rate to the loan amount, then add this to the principal and divide by the term in months to find the monthly repayment amount.

For detailed calculations and to adjust variables like interest rates and loan terms, using an online personal loan calculator specific to South Africa is recommended for accurate results.

To simulate a loan of ZAR 20,000 at an annual interest rate of 15% for a term of 36 months, you can consider an approximate formula or use an online calculator for exact figures. The monthly repayment for such a loan, based on typical calculations, would likely fall within the range of ZAR 693 to ZAR 700.

The total repayment over the 36 months would sum up to approximately ZAR 24,948 to ZAR 25,200, accounting for the interest accrued over the period. For precise calculations, utilizing an online personal loan calculator or a calculator of chosen bank or apply loan.

Prerequisites to obtain the term loans

To qualify for a personal loan, you need to be at least 18 years old, have a stable income, and be a citizen or resident with a good credit score. The required documents usually include a valid South African ID, recent payslips or bank statements, and proof of residence.

Financial institutions offering term loans

Term loans are offered by a variety of financial institutions. Here’s a glimpse into the South African banking landscape:

Diversity of institutions:

  • Traditional banks: These established institutions have a long history in South Africa, often with physical branches alongside digital banking options. They offer a comprehensive range of financial services, including term loans, mortgages, savings accounts, and investment products. Some examples include Standard Bank (founded 1862), Absa Bank (founded 1991), and First National Bank (FNB) (founded 1881).
  • Digital banks: These newer players operate primarily online, offering a streamlined and tech-focused banking experience. They may specialize in specific products like term loans or cater to a younger, tech-savvy demographic. Examples include TymeBank (founded 2018) and Capitec Bank (founded 1983, primarily digital since 2004).

Banks and financial institutions that offer term loans

Here are some South African banks and financial institutions that offer term loans:

  • Standard Bank: Standard Bank offers term loans, also known as personal loans, with fixed monthly repayments for terms between 12 and 84 months. You can apply online or through their mobile app and get the funds deposited directly into your account upon approval. They even allow early repayment with no penalties.
  • African Bank: Known for personalized loan options, including the “Choose Your Break” feature allowing a payment break.
  • FNB (First National Bank): Offers innovative banking solutions and a unique January break from loan payments for on-time repayments.
  • Nedbank: A bank with a strong local presence, offering loans with straightforward requirements for employed, self-employed, or pensioners.
  • Capitec: Challenges traditional banking with a focus on simplifying banking and includes retrenchment and death cover in their loans.
  • Absa: Part of Barclays, it provides loans with options for faster repayment to reduce interest.

Step by step to apply for the term loan

To apply for a Term Loan with any of the aforementioned banks, follow these steps:

  1. Compare loan options from different banks to find the best rates and terms.
  2. Ensure you meet the bank’s requirements, such as age, income, and employment status.
  3. Gather necessary documents, including a valid ID, recent payslips, and proof of residence.
  4. Submit your loan application through the bank’s website, app, or in person at a branch.
  5. Await approval, which may include credit checks and verification of documents.
  6. If approved, review and accept the loan terms to receive the funds.

For detailed instructions, it’s best to consult directly with the bank’s official website or contact their customer service.

Positives and negatives of the term loans

Term loans can be a useful tool for managing finances, but it’s crucial to weigh the pros and cons carefully. Here’s a breakdown of the pros and cons of South African term loans:


  • Predictable repayments: Term loans come with fixed monthly installments, making budgeting and financial planning easier. You’ll know exactly how much you owe each month for the entire loan term.
  • Access to larger amounts: Compared to overdrafts or credit cards, term loans allow you to borrow large sums of money. This can be helpful for financing bigger expenses like consolidating debt, home renovations, or even starting a business.
  • Improved credit score (potential): Making consistent and on-time payments on your term loan can positively impact your credit score. This can benefit you in the future when applying for other loans or credit products.


  • Interest Rates: Term loans can have higher interest rates than some other options like savings accounts or credit unions. This means you’ll end up paying more than the initial amount you borrowed.
  • Debt Burden: Taking on a term loan adds to your overall debt burden. If you’re already struggling with debt, a term loan might not be the best solution.
  • Prepayment Penalties (Potentially): Some term loans might have prepayment penalties, meaning you’ll be charged a fee if you pay off the loan early.

Alternatives to term loans

Here are some viable alternatives to term loans in South Africa, depending on your specific needs:

For smaller amounts

  • Retail credit cards: Credit cards offer a revolving line of credit, allowing you to borrow and repay funds as needed. This can be suitable for smaller, unexpected expenses. However, interest rates on credit cards tend to be high, so be cautious of carrying a balance.
  • Store cards: Many stores offer store cards with special promotions or discounts on their products. These can be useful for specific purchases, but might have limited use elsewhere.
  • Microloans: Microloans cater to smaller loan amounts, often with shorter repayment terms. These can be helpful for emergencies or quick financial needs but come with potentially high-interest rates. Check with reputable microloan institutions that adhere to responsible lending practices.

For specific needs

  • Asset-based financing: If you own a car or other valuable asset, you might consider asset-based financing. This allows you to borrow money using the asset as collateral. However, if you fail to repay the loan, you risk losing the asset.
  • Government grants: The South African government offers various grants and subsidies for specific purposes, like education or starting a small business. Researching these options could provide funding without incurring debt.

Building a savings base

  • Stokvels (informal savings clubs): These traditional rotating savings clubs can be a great way to save money together with others towards a common goal.
  • Savings accounts: Building an emergency fund in a savings account allows you to access cash readily for unexpected needs, eliminating the need for loans.

Term loans average rates and fees

Borrowers can generally expect the following average rates and fees for term loans:

  • Interest rates vary widely, typically from 6.55% to 27.75% per annum, depending on creditworthiness and loan terms.
  • An initiation fee up front, which is often capped by law (e.g., a maximum of R1,207.50 for loans above R10,000).
  • Monthly service fees, usually around R69.
  • Possible additional charges for credit insurance, which covers debt in case of death, disability, or job loss.

Customer service

Here’s a list of institutions and their provided term loans, along with their contact information:


  • A platform that matches borrowers with various personal loan options from different lenders.
  • Website: myloan.co.za
  • Contact Information: Detailed contact information is provided on their website for direct inquiries.

FNB (First National Bank)

African Bank

  • African Bank provides personal loans up to R250,000 with flexible terms and fixed repayments, accessible through phone, branch, or online, evaluating credit profiles and ratings.
  • For New Loan Applications: 0860 333 0004
  • Loan Inquiries: 0861 111 011
  • Customer Service Email: [email protected]
  • Official Website: www.africanbank.co.za


  • Provides short-term and medium-term business loans, including vehicle finance and property finance.
  • Website: www.absa.co.za
  • Phone: 0860 040 302 / 0861 00 11 55

Standard Bank


  • An alternative lender focusing on small and medium-sized enterprises, providing a range of financing options.
  • Website: www.lulalend.co.za
  • Phone: 087 943 2381
  • Email: [email protected]


  • Specializes in providing quick access to funding for small businesses, with a straightforward application and fast funding turnaround.
  • Website: www.fundrr.co.za
  • Phone: 079 217 5059
  • Email: [email protected]

Nedbank & Capitec

  • Nedbank and Capitec are major South African banks offering various loan products at competitive rates, based on financial situation and creditworthiness.
  • Nedbank Official Website: www.nedbank.co.za
  • Capitec Official Website: www.capitecbank.co.za

Arcadia Finance

  • Offers personal and consolidation loans by comparing options from various lenders.
  • Contact Information: Arcadia Finance operates primarily as an online comparison platform, so specific direct contact information isn’t provided. It’s recommended to use their online platform for applications and inquiries.

Why choose term loans?

Term loans in South Africa cater to a wide spectrum of financial needs and customer profiles, offering a versatile solution for both individuals with strong credit histories and those looking to improve their credit scores.

These loans can be particularly beneficial for borrowers seeking to consolidate debt, manage unexpected expenses, or fund significant purchases.

With options available for online application and management, term loans combine traditional lending’s reliability with the convenience of digital banking, making them accessible and manageable for a broad range of customers, from entry-level to high-income earners.