Personal Loans in South Africa: What They Really Cost
Last reviewed:
Personal loans are unsecured — meaning there is no asset (like a car or house) backing the loan. This makes them riskier for the lender, which is why interest rates are significantly higher than secured credit. Understanding the true cost helps you make informed decisions.
Interest Rates: Why Personal Loans Cost More
The NCA maximum rate for unsecured credit is (repo × 2.2) + 21%, currently about 37.5%. Most banks offer personal loans between 15% and 28% depending on your credit score and income. Always compare the total cost of credit, not just the monthly instalment.
NCA Fees Apply Here Too
The same NCA initiation fee (up to R1,207.50 incl VAT) and monthly service fee (R69 incl VAT) apply to personal loans. The initiation fee is added to the loan principal, so you pay interest on it for the entire term.
When a Personal Loan Makes Sense
Consolidating high-interest credit card debt at a lower personal loan rate can save money. Emergency expenses with no alternative. Funding a specific purchase with a defined payoff timeline. When it does NOT make sense: ongoing living expenses, lifestyle spending, or when you already have excessive debt.