Why six months matters
The National Credit Regulations treat a loan of up to R8 000 that must be repaid within six months as a short-term credit transaction. Its interest is capped per month: 5% on the first such loan you take in a calendar year and 3% on later ones. A larger loan, or one repaid over a longer term, is usually an unsecured credit transaction, capped at the repo rate plus 21% a year.
That makes six months and R8 000 a line worth knowing. The monthly short-term cap works out far higher per year than the unsecured cap, so the same lender can be allowed to charge very different amounts for loans that look similar.
Worked examples
R5 000 over six months as short-term credit: worked out as a single repayment at the end, the costliest way, interest, fees and VAT may total at most R2 543.20. On R8 000 the maximum is R3 775.87. On a later short-term loan in the same calendar year the interest part falls to at most R1 420.27 on R8 000.
R10 000 over six months is an unsecured loan. Repaid in six equal instalments, the most each may be is R1 866.66, and the most you may repay in total is R12 461.43. On R20 000 the maximum instalment is R3 673.31 and the total R23 301.36. Real offers usually cost less; these are the legal ceilings.
Fees on top of interest
Both kinds of loan may carry an initiation fee of at most R165 plus 10% of the amount above R1 000, never more than R1 050, and a service fee of at most R60 a month. VAT may be added to the fees. Credit life insurance, if the lender requires it, comes on top, and you may take the cover from an insurer of your choice instead.
On a six-month loan the fees are a large share of the cost. Ask for the quotation, which must show every fee, the instalment and the total, and compare that total between lenders rather than the interest rate.
Is six months the right term?
Six months suits an amount too large to repay from one salary but small enough that the instalment stays comfortable. If the instalment would take too much of your income, a longer term lowers it, at a higher total cost; our page on long-term loans compares terms from three months to six years. If you can repay in one or two months, a shorter loan costs less.
You may settle any loan early, so a six-month term repaid in four costs only the interest and fees up to the day you settle. Use our loan cost calculator to see the legal maximum for your own amount and term before you compare offers.
Who offers six-month loans
Many short-term lenders offer terms of up to six months, and loan-matching services pass applications to lenders with longer terms. Whoever you use, check the lender's NCR registration number on the National Credit Regulator's register, and never pay a fee before the loan is paid out.