Two Main Loan Types in South Africa
Choosing between secured and unsecured loans can save you thousands in interest and determine whether you get approved at all. The difference goes beyond just putting up collateral – it affects your interest rate, loan amount, approval chances, and what happens if you can’t repay.
When Your Assets Back Your Borrowing
Secured loans require you to put up an asset as collateral to guarantee repayment. Common examples include car loans (secured by the vehicle) and asset-based loans using jewelry, watches, or equipment as collateral.
The process is straightforward: you apply for the loan and offer an asset as security. The lender evaluates the asset’s current market value and typically offers 60-80% of that value as the loan amount. The asset must be fully paid off and registered in your name.
The collateral reduces the lender’s risk, which translates into better terms for you: lower interest rates, higher loan amounts, and easier approval requirements. During the loan term, you keep using the asset (for car loans) or the lender stores it securely (for valuable items).
Borrowing Based on Your Financial Profile
Unsecured loans don’t require any collateral. The lender relies purely on your creditworthiness, income, and promise to repay. Personal loans, credit cards, and payday loans are typical examples.
You apply based on your credit score, employment history, and income. The lender assesses your ability to repay through credit bureau checks and affordability calculations. Without collateral to reduce their risk, lenders charge higher interest rates and impose stricter approval criteria.
If approved, you get the money without pledging any assets. However, defaulting can still have serious consequences including legal action, garnished wages, and damaged credit scores.
Pro Tip: Finding the right unsecured loan often means applying to multiple lenders since approval criteria vary widely. LoanHub24 simplifies this process by connecting you with lenders who specialize in your credit profile, saving you time and increasing your approval chances for unsecured loans.
Key Differences: Side-by-Side Comparison
| Factor | Secured Loans | Unsecured Loans |
| Collateral Required | Yes – car, property, jewelry, etc. | No collateral needed |
| Interest Rates | 8% – 15% annually | 15% – 27% annually |
| Loan Amounts | Higher (up to asset value) | Limited by income |
| Approval Speed | 24-48 hours | Same day to 1 week |
| Credit Requirements | Less strict | Good credit essential |
| Risk to Borrower | Loss of asset if default | Legal action, credit damage |
| Typical Terms | 12-96 months | 6-84 months |
Which Option Suits Your Situation?
Choose Secured Loans When:
- You need a large loan amount (over R50,000)
- You want the lowest possible interest rate
- You have valuable assets but limited credit history
- You prefer longer repayment terms for lower monthly payments
- You’re confident about repayment and comfortable with asset risk
Choose Unsecured Loans When:
- You need money quickly without asset evaluation delays
- You don’t own valuable assets to use as collateral
- You’re unwilling to risk losing your assets
- You need a smaller loan amount under R25,000
- You have excellent credit that qualifies you for competitive rates
Why LoanHub24 Makes Loan Shopping Easier
Save Time and Effort: Rather than applying to multiple lenders separately and waiting for individual responses, you get several offers through one application process.
Get Matched Properly: Our system connects you with lenders who actually want to work with borrowers in your situation, whether you have excellent credit, challenges, or specific collateral to offer.
Compare Real Offers: Instead of guessing about rates and terms from websites, you receive actual loan offers showing interest rates, amounts, and repayment terms you qualify for.Access Both Loan Types: Whether you’re suited for secured loans with lower rates or unsecured loans with faster approval, our network includes NCR-registered lenders who specialize in different borrower types and loan structures.
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