How much does it cost to borrow 100,000 rand in South Africa

If used correctly, credit can add positive value to your overall financial well-being. But you need to make sure you understand the total amount you’ll be repaying and whether that amount is reasonable for the need you want to use the credit for, says Ester Ochse, product manager of FNB Money Management.

Ochse gave the example of a person borrowing an amount of R100,000 for a period of five years. The quote you receive from the financial institution indicates that you get an interest rate of 15% and the monthly payment is R2,508.46.

Ochse said a credit provider will calculate your payment amount as follows:

  • Amount of capital (or principal) – this is the actual amount you are borrowing. In this case, the amount of R100,000.
  • Interest rate – this is the amount the financial institution will charge you to borrow money from them. The amount charged will depend on your credit score. In this example, the interest rate is 15%.
  • Monthly service fees – these are the fees that the financial institution will charge monthly to administer the loan. These normally range from R50 to R115 per month. In this case, let’s assume it’s R69 per month.
  • Initiation fee – This is the amount that the financial institution will charge for the loan documents and the administrator for starting the agreement. These are also around R1,000 per loan. Suppose this is R1,207.50.
  • Consumer Protection Regime (CPR) – This is insurance that will repay and cover the outstanding amount of the loan in the event of death, disability or temporary loss of income. Suppose in this case it is R324 per month.

All of these amounts add up to the total cost you will pay for the loan over the term for a total of R50,507.60, Ochse said. This added to the initial loan of R100,000 would bring the actual total to R150,507.60.

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