Two loans can have the same headline interest rate and cost very different amounts. That’s because the rate is only part of the cost — fees, term, and compounding all change what you actually repay. Here’s how to compare offers on the numbers that matter, not the marketing.
Look at total cost, not just the rate
A loan at 12% with high fees can cost more than a loan at 14% with low fees. The single most useful comparison is total cost of credit — the sum of everything you’ll repay above the amount you borrowed.
Always ask for, and compare, the total amount repayable across the full term, not just the monthly instalment or the interest rate.
Understand the fees
South African lenders may charge:
- Initiation fee — a once-off fee to set up the loan, capped by the NCA.
- Monthly service fee — an ongoing fee while the loan runs, also capped.
- Credit insurance — often mandatory, covering the loan if you die, become disabled, or lose your job.
- Early settlement fee — some lenders charge if you pay off early.
Add all of these to the interest to get the true cost. A low-rate loan with high monthly fees can be more expensive than a higher-rate loan with no fees.
Use the APR, if it’s quoted
The annual percentage rate (APR) is meant to bundle interest and certain fees into one comparable number. If a lender quotes an APR, compare APRs. If they don’t, compute the total cost yourself.
Check the term’s effect
A longer term lowers the monthly payment but increases the total interest you pay, because the debt compounds for longer. A R250,000 loan at 11.75% costs far more over 25 years than over 15 — even though the monthly payment is lower on the 25-year term.
The loan calculator shows this trade-off instantly: change the term and watch total interest move.
Watch the interest rate type
- Fixed rate — stays the same for the whole term. Predictable.
- Variable / prime-linked rate — moves when the repo rate moves. Your payment can rise or fall.
A variable rate often starts lower but carries the risk of increases. Factor that risk into your comparison.
Read the early settlement terms
Some loans penalise early repayment, which matters if you plan to pay off early. Ask:
- Is there an early settlement fee?
- Is interest recalculated on the reduced balance if you pay extra?
A loan that lets you pay extra without penalty can save you significant interest.
The five questions to ask any lender
- What is the total amount I’ll repay over the full term?
- What fees apply, and how much are they?
- Is the rate fixed or variable?
- What happens if I settle early?
- Is credit insurance included, and can I shop for it?
Where to verify
- National Credit Regulator — Cost of credit — the fee and interest caps.
- Your lender’s written quote — which is legally required before you sign.
For context, read how loan interest works in South Africa and how to calculate loan repayments.