In South Africa, it’s not uncommon to face financial shortfalls before payday. For many, the quick fix seems to be a temporary loan — fast cash with little paperwork. But what looks like a lifeline can actually turn into a long-term financial anchor, especially if you’re dreaming of buying a home.

Here’s why temp loans can be far more damaging than helpful — and why using your overdraft facility (if you have one) might be a smarter move.

Temporary Loans Signal Financial Struggle to Credit Providers

On your credit report, every loan you take paints a picture of your financial habits. When lenders – especially banks - review your profile, they’re not just looking at whether you repay on time. They’re assessing your reliance on debt.

Taking out repeated temporary loans shows a pattern of financial instability. It tells the bank, “This person regularly runs short on cash and needs help to make it through the month.” That’s a red flag if you’re applying for a big loan like a mortgage.

It Hurts Your Credit Score, Even If You Repay on Time

You might think, “But I always repay my temp loans on time.” Unfortunately, that’s not enough. Credit bureaus don’t just measure whether you’re paying back — they look at the type of credit you’re using.

Temporary loans are high-risk, high-interest short-term credit. Frequent use of these products brings down your credit score. And a lower credit score = lower chances of getting approved for a home loan (or getting a good interest rate on it).

It Can Jeopardise Your Home Loan Application

Banks take home loans very seriously. Even if you have a stable job and a decent income, your track record with debt plays a big role.

When they see you’ve taken multiple temporary loans in the past few months, they may:

• Reject your home loan application outright
• Offer you a lower loan amount than you need
• Charge you a much higher interest rate

This could put your dream of owning a home on hold indefinitely — all because of short-term borrowing

Overdraft Is a Better (and Safer) Alternative

If you sometimes run into cash flow issues, rather use your bank’s overdraft facility. Here’s why:

• Lower interest rates than most temp loans
• No credit check every time you dip into it
• Doesn’t appear as a new loan on your credit report each time you use it
• Seen more favourably by banks — especially when managed responsibly

Of course, an overdraft must still be used wisely. But from a credit perspective, it’s far better than falling into a pattern of temporary loans.

The Bottom Line

Temporary loans might solve a short-term problem, but they can create long-term consequences — especially when it comes to getting a home loan. They damage your credit profile, lower your score, and show banks that you may not be ready for major credit.

If you’re serious about homeownership, start making decisions that reflect financial stability. Skip the temp loans, talk to your bank about setting up an overdraft, and focus on building a strong, consistent credit history.

Your future self — and your dream home — will thank you.

Getting ready to apply for a home loan?

If you’re getting ready to apply for a home, it might be a good idea to get in touch with a mortgage broker – who will check your profile, complete a pre-assessment and give you the best advice to prepare for your application going forward.

Using a reputable broker will ensure you get more clarity out of the bureau data and how it might affect your chances of approval. By using a broker, you can access multiple offers simultaneously and negotiate on fees and interest rates so you can have the confidence knowing you received the best deal in the market at the time.

Phoenix Bonds is a premium mortgage broker in South Africa, with a proven track record (check out the reviews on Google).  For expert advice and personalised service, fill in your details HERE and one of our experienced Consultants will be in touch.