When the cash genuinely runs out, the order in which you reach for credit matters enormously. Start with your own buffer, work down through your bank's facilities, and only ever borrow from registered, National-Credit-Act-compliant lenders. Right at the bottom, below everything, sit the mashonisas, who you avoid completely. This guide ranks your options from cheapest and safest to most dangerous.
The order, cheapest and safest first
- Your own emergency buffer. Dip into savings before taking on any debt at all. It costs nothing and carries no risk.
- Family or friends, documented and interest-free. Only if the relationship can carry it. Put the amount and the repayment plan in writing so there is no misunderstanding later.
- Your existing overdraft. If it is already arranged with your bank, the rate is typically in the region of 20 to 24 percent. High, but far cheaper than the alternatives further down.
- An existing credit card. A similar rate to an overdraft. Use it for essential purchases, not cash advances, which cost more.
- A personal loan from a registered bank. Apply through your own bank. National Credit Act rules cap the rates and require an affordability assessment.
- A registered micro-lender or credit provider. Ask to see their National Credit Regulator (NCR) registration certificate before you sign anything.
- Government support. SEFA (Small Enterprise Finance Agency) at sefa.org.za offers emergency finance for small enterprises, and SEDA (Small Enterprise Development Agency) at seda.org.za can advise.
What to avoid
- Mashonisas, the illegal loan sharks. They are unregistered and charge illegal rates, and they use intimidation to collect. Under the National Credit Act a loan from an unregistered provider is unenforceable, but it is dangerous in practice all the same.
- "No credit check" adverts. A red flag. Any legitimate lender must assess your affordability under the National Credit Act.
- Payday loans with very short terms and high fees, which can trap you in a repeating cycle.
A warning about SASSA cards
If anyone in your household receives a SASSA grant, do not let anyone offer credit against the SASSA card. The practice is illegal and exploitative, and it is unfortunately common. The grant is for the household, not collateral for a lender.
Common mistakes
- Reaching for credit before your own savings. Your buffer is the cheapest money you will ever borrow. Use it first.
- Lending or borrowing with family on a handshake. Write down the amount and the repayment plan to protect the relationship.
- Taking a "no credit check" loan. A lender that skips the affordability check is not following the law. Walk away.
- Going near a mashonisa. The debt may be unenforceable in law, but the collection methods are real. Stick to registered, NCR-listed lenders.
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