Loan or credit facility: which you have
A loan gives you a fixed amount with a fixed end date. A credit facility gives you a limit you can use, repay and use again. They suit genuinely different needs, and using one for the other’s job is where the cost comes from.
A loan is disciplined by design: the amount is set, the term is set, and it ends. For a known cost, that structure is an advantage — you cannot accidentally extend it.
A facility is flexible and, for exactly that reason, easy never to clear. Paying the minimum on a revolving balance can continue indefinitely, and the total interest over years dwarfs what a term loan would have cost.
A facility is usually cheaper for a genuinely short, unpredictable need, because you pay interest only on what you use and only while you use it. A loan is cheaper for a defined cost because it forces the balance to zero.
The failure mode to watch: using a facility for a one-off cost and then never clearing it. If you take that route, set your own repayment schedule as though it were a loan.
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.