Total cost of credit
Total cost of credit is everything you pay above the amount you borrowed: interest, initiation fee, service fees, VAT and any compulsory insurance. Every South African pre-agreement quote must show it, and it is the only figure that lets you compare two offers honestly.
What you need to know
Instalments are not comparable between offers, because they depend on the term. A loan with a lower instalment and a longer term can cost far more in total than one with a higher instalment over fewer months — which is exactly why advertising leads with the instalment.
Interest rates are not comparable either when the products differ: a monthly rate on short-term credit and an annual rate on a personal loan measure different things on different bases. The total cost figure is on the same basis for both.
Check what is inside the total. Compulsory credit life insurance should be in it; optional extras may be quoted separately. Where two quotes differ and the rates match, insurance is usually where the difference is hiding.
What R5 000 over 6 months actually costs
At the NCA maximum for a first short-term loan (5% a month). An illustration, not a quote.
| Line | Amount |
|---|---|
| Amount borrowed | R5 000 |
| Interest (5% × 6 months) | R1 500 |
| Initiation fee | R565 |
| Service fee (R60 × 6) | R360 |
| VAT on fees (15%) | R139 |
| Total you repay | R7 564 |
| Monthly instalment | R1 261 |
Cost of credit: R2 564 on R5 000 borrowed. Figures are calculated at the statutory maximum — your own quote may be cheaper, and must be shown to you in full before you sign.
Related
Sources and last checked
- National Credit Act 34 of 2005 and its regulations — Government, as at 10 August 2026.
Page last checked 10 August 2026. Statutory caps and lender terms change — confirm anything you intend to rely on with the provider or the National Credit Regulator. Found something wrong? Tell us and we will correct it.