Borrow Smart: A Young South African’s Guide to Loans and Credit Cards

Level up your money game | Published: Nov 29, 2025

Debt Management Personal Finance Borrowing Money Credit Cards Personal Loans Student Loans Good Debt Bad Debt Financial Literacy

Borrow Smart: A Young South African’s Guide to Loans and Credit Cards

You’re young, South African, and trying to get your life started. You might need a laptop for varsity, a car to commute, or funds to cover an unexpected medical bill. Borrowing, when done wisely, isn’t the enemy. It can help you unlock opportunities, manage emergencies, and build your future.

Good Debt vs. Bad Debt

Not all debt is created equal. Some loans move you forward; others hold you back.

Good Debt: Money borrowed to build your future, like a student loan that leads to a better-paying job, a car loan for reliable commuting, or a business loan to launch your side hustle.
Bad Debt: Funds things you don’t need (e.g., flashy clothes, expensive holidays) or can’t afford, often at high interest rates. It doesn't grow your income or future.

Rule of Thumb:

“Will this loan help me earn more, save more, or increase my assets over time?” If the answer is yes, it might be good debt.

Different Types of Borrowing

Borrowing Type	How It Works	Best For
Credit Card	Revolving credit limit. You can use it, pay it back, and use it again. Interest-free period (usually up to 55 days) if paid in full.	Building a credit score; planned emergencies (if you can repay quickly).
Personal Loan	Fixed amount borrowed, fixed repayment term (e.g., 36 months) with a fixed interest rate.	Large one-off purchases like tuition, medical bills, or furniture.
Student Loan	Special loan for education, usually at a lower interest rate, with deferred payment options until you finish studying.	University or TVET fees.
Store Account	Credit for clothing or electronics (e.g., Edgars, Foschini, Game). High-interest rates apply after the interest-free period.	Building credit history; necessary workwear/equipment (if repaid fast).

Danger Zone: Payday Loans and Mashonisas

These are high-risk forms of borrowing, often tied to your salary, from microlenders.

The Problem: Extremely high interest (often 30–60%) and the risk of falling into a debt spiral if you can’t repay it immediately.
Best for: Absolute last resort. Exhaust all other options (e.g., family, savings) first.

Avoiding Debt Traps

Borrowing can go wrong fast if you’re not careful. Here’s how to stay safe:

Steer Clear of Mashonisas: Unregulated lenders charge 50–100% interest, trapping you in debt. **Always use NCR-registered lenders** (like banks).
Limit Credit Applications: Too many applications (e.g., 3 cards in a month) hurt your credit score. Apply only when necessary.
Read the Fine Print: Check loan terms for hidden fees, early repayment penalties, or variable interest rates. Ask questions if unclear.
Budget for Repayments: Include loan payments in your budget. Cut wants (like takeaways) if needed to ensure you can afford the payment.
Beware Social Media Scams: X or WhatsApp ads for “easy loans” often lead to fraud. Verify lenders via the National Credit Regulator (NCR) or bank apps.

Next Steps: Check your credit score on ClearScore and review your budget to see what repayments you can afford. Compare loan options on a site like Fincheck.co.za.