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Borrowing

The total cost of credit

Interest, initiation fees, monthly service fees and the term together decide what you repay. A lower instalment can cost more.

Reviewed 29 October 2026 by the WiT Money editorial team. This is general information, not a recommendation from a named adviser.

Key points

  • Compare total payable on the same amount and a term you can live with.
  • Initiation and service fees are part of the cost even when interest looks low.
  • The National Credit Act caps certain fees. This page does not print a cap that has not been re-checked.

The interest rate is the price of the money. Fees are extra. An initiation fee is charged up front and is sometimes added to the amount you owe. A monthly service fee is added to the instalment. Credit life, if you take it, is another monthly amount. Stretching the term lowers the instalment and usually raises the interest.

The Act limits initiation fees, service fees and interest on the agreements it covers. Those limits are amended from time to time. A guide that prints an old rand cap as if it were permanent will mislead you. Use the quotation in front of you, and check the regulator if you think a fee is above the current limit.

How to compare two quotes

Put each quote into the total-cost calculator: amount, rate, months, initiation fee and monthly service fee. Look at total interest, total fees and total payable. Ignore a comparison that only ranks the advertised rate.

What a longer term does

A 60-month loan almost always costs more interest than a 24-month loan at the same rate. It can still be the agreement that passes an affordability test. That does not make it cheaper. If you can pay more each month without crowding out essentials, the shorter term is usually the smaller total.

Credit life

Credit life pays the agreement in some events, such as death or disability, subject to the policy wording. It is not free because it is added to the instalment. You may have existing cover that the lender will accept. Ask.

Questions readers ask

Should I leave fees at zero in a calculator?

Only if the quote shows zero. A blank fee is not a free fee. Do not type zero for a charge you have not read.

Related

Sources

Page updated 29 October 2026. A source date is the day WiT Money checked that page, not a promise the institution has not changed it since.