How the instalment is worked out
Most personal loans are repaid in equal monthly instalments. Each instalment pays the interest charged on the balance that month and repays part of the amount borrowed, so the balance falls a little every month until it reaches zero on the last payment. Early on, most of each instalment is interest; towards the end, most of it repays the loan.
On top of the instalment, lenders usually charge a monthly service fee, at most R60 plus VAT. The once-off initiation fee may be paid upfront or added to the loan, and credit life insurance, if required, adds its own monthly premium.
What R100 000 may cost a month
At the legal maximum rate of 28.25% a year, a R100 000 loan costs at most R4 209.88 a month over 36 months, including the service fee, and R3 188.68 a month over 60 months. Over 36 months you repay at most R153 087.07 in total; over 60 months, at most R193 068.39.
Those are ceilings, not quotes. A lender that offers you a lower rate gives you a lower instalment, and the pre-agreement quotation it must give you before you sign shows the exact amount.
Why a longer term costs more
Stretching the term lowers each instalment but raises the total, because interest runs for longer and the service fee is charged every month. A R20 000 loan costs at most R1 160.32 a month over 24 months and R759.91 over 48 — but the total rises from R29 271.17 to R38 115.03.
A sensible way to choose is to start from the instalment you can carry comfortably after all your other expenses, then pick the shortest term that fits it. The loan cost calculator works out the maximum for any amount and term.
Reading the instalment in a quotation
The pre-agreement quotation a lender must give you shows the instalment, but check what it includes. Some quotations show the instalment without the monthly service fee or the credit life premium and list those separately; add them up to see what will actually leave your account each month.
Check, too, whether the rate is fixed or linked to the repo rate. With a linked rate, the instalment rises when the Reserve Bank raises the repo rate, so leave yourself room in the budget rather than borrowing up to the last rand you can afford today.
What lenders check before they agree
Every registered lender must check that you can afford the instalment: it looks at your income, your existing debt repayments and your living expenses. The amount you are offered may be lower than you ask for, or the term different, so that the instalment passes that check.
Our page on personal loans in South Africa lists registered lenders with their amounts and terms and a table of the most each size of loan may cost a month.