The lending market you are borrowing in
Pricing moved again in September, when the Reserve Bank lifted the repo rate by 25 basis points to 7.25%. Prime followed to 10.75%. If your loan is priced as "prime plus", your instalment rises with it, even on an agreement you signed two years ago. That detail matters more than the headline number on the poster in the shop window.
The National Credit Act puts a ceiling on what any registered lender may charge. For unsecured credit the formula works out to roughly 35.95% a year at today's repo rate, and anything above that sits outside the law. Short-term loans, the kind repaid within six months, are capped at 5% interest a month, with an initiation fee of no more than R165 before VAT.
Then there is the cash lender down the road. Mashonisas operate outside the register and commonly charge 30% to 50% a month, several times the legal limit. They also break the law when they hold your ID book, bank card, PIN or SASSA card as security. The regulator is blunt about the consequence: a loan from an unregistered lender cannot be enforced in court. That protection rarely reaches someone whose bank card is already in a stranger's drawer, which is why the NCR number on the letterhead deserves a check on ncr.org.za before you hand over a single document.
Three borrowers, three different problems
Thandi, 34, Soweto. An admin clerk on a steady salary, she needed R12,000 after a car repair and a set of school uniforms landed in the same month. A short-term loan capped at R8,000 would not cover it, and stacking two of them would cost more than the repair itself. A personal loan spread over 24 months was the fit, and her permanent contract made the affordability assessment straightforward.
Sipho, 41, Gqeberha. A diesel mechanic with three store accounts and a clothing account, he was paying four instalments and four admin charges every month. A consolidation loan brought it down to one payment. The catch he nearly missed: consolidation only works if the old facilities are closed. Otherwise the freed-up credit gets spent and he ends up carrying both.
Ayesha, 28, Cape Town. A freelance designer with six months of uneven invoices behind her, she was declined twice and was close to visiting a mashonisa for R3,000. She joined a small stokvel with two cousins instead, then applied again four months later with a cleaner bank statement. The rate she was eventually offered came in below what the informal lender wanted per week.
Side-by-side comparison
| Option | Typical amount | Repayment term | Cost profile | Suits | Watch out for |
|---|
| Short-term loan | R500 to R8,000 | Up to 6 months | Up to 5% interest a month, initiation fee capped at R165 plus VAT | A one-off gap you can clear by next payday | Rolling it over month after month |
| Unsecured personal loan | R1,000 to R350,000 | 12 to 72 months | Priced off prime, capped near 35.95% a year | A defined expense you can repay over a year or more | Credit life insurance you did not ask for |
| Consolidation loan | Set by the debts combined | Usually 24 to 60 months | Similar to unsecured pricing | Several small debts at high rates | Keeping the old accounts open |
| Secured loan | Determined by the asset offered | Varies with the asset | Lower rate, since the lender can repossess | Borrowers with a bond or a paid-off vehicle | Losing the asset if you default |
| Mashonisa | Small, same day | Days or weeks | 30% to 50% a month | Nothing a registered lender cannot do better | Unregistered, unenforceable, often predatory |
The costs that sit outside the interest rate
Every credit agreement must show a total cost of credit, and that figure is the one worth reading. Interest is only part of it. A monthly service fee applies on many accounts, charged on the outstanding balance rather than waived as the balance falls. Credit life insurance is often bundled into the instalment, and you are allowed to substitute your own policy if it offers comparable cover.
Term length changes the arithmetic more than most people expect. Take a R60,000 loan quoted at 24% a year: over 36 months the instalment lands near R2,350 and total repayment near R84,700. Stretch the same loan over 60 months and the instalment drops to about R1,730, while total repayment climbs past R103,600. A lower monthly figure is not a cheaper loan. It is a longer one.
Settlement is the other lever. The Act entitles you to settle early and pay less interest than the schedule assumed, so ask for a settlement quote rather than simply paying the instalment until the end. On a 48-month agreement cleared at month 20, that difference is real money.
Before you sign anything
Work through this in order, on paper, with the consultant sitting opposite you.
- Confirm the NCR registration number and search it yourself.
- Ask for the total cost of credit and the exact monthly instalment, in writing.
- Check what the credit life policy covers, what it costs, and whether you may supply your own.
- Never hand over an ID book, bank card, PIN or SASSA card as security. It is a criminal offence for a lender to ask.
- Refuse any request for an upfront "admin" or "processing" payment to a consultant before the money is disbursed.
- Keep the instalment inside a share of your income you can survive a bad month on.
Help that already exists
The National Credit Regulator handles complaints against registered providers and can confirm whether a lender is legitimate. Each credit bureau must give you one credit report a year at no charge, and reading it before you apply tells you what a lender will see. If repayments have already become unmanageable, a registered debt counsellor can assess you for debt review, which restructures what you owe rather than adding to it. The National Financial Ombud steps in when a provider will not resolve a dispute, and provincial consumer affairs offices in Gauteng, the Western Cape and KwaZulu-Natal run walk-in advice desks.
One last practical point about timing. Lenders assess affordability on bank statements, so three months of clean, consistent activity does more for your application than a persuasive motivation letter. If you are self-employed or paid irregularly, six months of statements and a current tax return shorten the conversation considerably.
Pull your credit report this week, check one NCR number, and price the loan against its total cost rather than its instalment. The borrower who does those three things rarely ends up paying mashonisa rates for a bank loan.
研究の知恵