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What is the maximum you can charge?
Many consumers want to take advantage of credit and wonder how much they could pay for access to credit.
With loans and bonds, there can be one Admission fee However, other accounts, such as a clothing account or credit card, may have a monthly term Service fee or annual fee.
In all cases, however, loan providers make money on fees interest. There are three main types of credit that most people use in South Africa today:
- Mortgages (also called bonds)
- Unsecured loans (like large loans)
- Credit facilities (these usually never really pay off and can be used over and over again – like an overdraft)
The National Credit Act (NCA) and regulations limit how much interest loan providers can charge you for any type of loan. The maximum percentage that can be billed to you depends on the so-called repo rate and the prime rate of the banks.
For example, banks can charge you the repo rate plus 12% for your bond. They are not allowed to charge you anymore. If they do, they are breaking the law and you can report them and facing huge fines.
“The National Credit Act (NCA) and regulations limit how much interest loan providers can charge you on any type of loan.”
Many smaller unregistered lenders (loan sharks) charge very high interest rates that are higher than the law allows. It is obvious illegal and they can be reported. This could lead to the National Credit Regulator (NCR) investigating you or even the SAPS raiding your offices and arresting people.
What are the current highs?
- Bonds (called mortgages): 15.5%
- Unsecured loans (like large loans): 24.5%
- Credit facilities: 17.5%
Remember just because these are the maximum interest rates that the banks and other lender providers can Charging does not mean that you charge the maximum.
“That doesn’t mean they charge the maximum.”
To attract customers or to reward those with good credit ratings, some lenders sometimes offer lower interest rates (or lower monthly account or borrowing fees). This has been the case very often with vehicle finance lately as auto sales have plummeted to very low levels.
If you are considering taking out loans, be sure to request a comprehensive quote on what will cost you monthly and overall. This will help you decide on the best deal (shop-around) and ensure that you can afford the loan and the total cost.
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