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Personal Loan vs Mortgage

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The sheer variety of loans available can be a little daunting for anyone. Most people, however, will need some form of credit in their lifetime, and for this reason it is important to get familiar with some of the options available. Here we will look at the difference between a personal loan and a mortgage.

How can you use a personal loan?

A personal loan is generally unsecured credit provided by a registered financial institution and credit provider. As it is unsecured, you are not expected to provide any assets as collateral to secure the funds granted. Loan amounts vary from just a few thousand, to many thousands of rands, and are paid back over an agreed upon term of months, often up to 60 or 72 months. The amount that you will be offered will largely depend on your current credit score and record, as well as your personal financial profile.

What is a mortgage?

A mortgage, also referred to as a bond, is long-term credit and can run for up to 25 or more years. It is provided to you to purchase your home, with the property as collateral until the repayment of the loan is complete. Should you fail to maintain repayments, the bank that has provided the funds has the right to sell the property to cover the outstanding balance of your mortgage.

In terms of further credit, you can look at taking a 'second mortgage', which is essentially a way to take advantage of the equity in your home. Equity is the difference between your outstanding loan balance and the market value of your home.

Personal Loan vs Mortgage

There is not too much of a battle between these two types of credit. A mortgage is used to purchase your home, while a personal loan is a flexible line of credit that can be used for any reason. A personal loan can even complement a bond should you need cash for home related reasons such as legal fees, duties, or moving costs, or more. Of course you could consider applying for a personal loan online if you need to consolidate debt, fund travel plans, do some renovations or make larger purchases, among many other options.

If you are unsure about making a financial arrangement, chat to a financial expert before you make your decision.


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DirectAxis is a business unit of FirstRand Bank Limited, an Authorised Financial Services and Registered Credit Provider, NCRCP20. Direct Axis SA (Pty) Ltd, Reg no. 1995/006077/07, an authorised Financial Services Provider, FSP7249 & FSP5. 108 De Waal Road, Diep River 7800.

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Loan repayment terms range from 24 to 72 months. The maximum interest rate with regards to a DirectAxis Personal Loan is 24.50% per annum (compounded monthly). Your rate and initiation fee will be determined according to your personal risk profile.

An illustrative example of a loan at an interest rate of 24.50% per annum would be: Loan amount R50 000 plus a once-off initiation fee of R1 207.50 and a monthly admin fee of R69.00, over 72 months.

The total cost of the loan will be R 103 155.57 which is a maximum Annual Percentage Rate (APR) of 27.76%.