Can Personal Loans Easily be used as Affordable Home Loans?

Dec 14, 2016
Author: Ean Barnard

Many South Africans have questions surrounding affordable ways to finance their dream home and at Fincheck we want to help make that dream more reachable by helping you answer those questions.

What are Personal Loans?

Comprehensive information on personal loans can be found on the Fincheck personal loans page, but, in general, personal loans in South Africa are known to be unsecured loans that can be used for various things such as emergencies,  home improvements, weddings, holidays, or whatever else needs financing. Personal loans also have limits on how much funds can be borrowed and the maximum repayment period is 72 months.

What are Home Loans?

Home Loans in South Africa are secured loans taken out against property - usually your house. This means that the bank will hold the title deed to your house until the loan is paid off and, consequently, it holds the risk of the bank selling your house in the case of default.

At first glance, personal loans seem to be the obvious choice as it can generally be used for any purpose without the need to specify what the funds will be used for. There is also no need to give your home as collateral. BUT this does not mean that personal loans are the most affordable option.

What you should know before using a personal loan to finance your home

The most important difference between using home loans or personal loans to finance your home comes down to the difference between secured and unsecured loans. For comprehensive detail on the difference between these loans, you can visit Fincheck’s blog post on the benefits of both secured and unsecured loans.

For our purposes, here’s what you need to know:

  • Because there is less risk involved for the credit provider in providing a secured loan, a lower interest rate will usually apply. Therefore, you will pay a lot more interest on the same amount of money if it is borrowed by means of a personal loan.  
  • With secured loans, your monthly instalments should be less in comparison to unsecured loans as the credit provider is not as pressed to ensure that they get their money back as soon as possible.
  • There is a limit on the amount of money you can borrow with personal loans, so you might need to take out more than one loan to cover your whole home’s cost - which can have a negative impact on your overall credit rating.
  • With home loans, it is often possible to repay the loan over a longer period of time where long term personal loans have a limit of 72 months. This means that the monthly instalments to pay off the loan will be higher in the case of personal loans.

It is also important to remember that, even though you do not need assets to obtain a personal loan, your assets can still be sold if you fail to be able to repay the loan. Therefore, home loans in South Africa are a more cost effective way to finance your dream home.


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Fincheck is a financial comparisons website that organises information to assist the borrower in making their best financial decision.

Fincheck gathers information from numerous banking partners and presents it to the borrower in a simple, understandable way. Lenders benefit from an additional market place and extensive customer reach. Loan amounts vary from lender to lender. Fees, interest rates, loan amounts and credit scores influence the repayment terms. Lenders require personal details to control their risk and assist the government to combat theft, money laundering, terrorism. Fincheck does not endorse any particular product or company. We are an independent company. The information shown and provided is an opinion, based on numbers and must not be seen as advice or consultation.