Your right to settle
The Act lets you settle a credit agreement whenever you choose. You do not need the lender's permission, and you may settle part of the balance early too: extra payments reduce the amount on which interest is charged, which lowers the total cost.
What the settlement amount includes
The amount needed to settle is the unpaid balance of what you borrowed, plus unpaid interest and the fees and charges due up to the settlement date. Interest stops on the day you settle; future interest and monthly service fees fall away.
Ask the lender for a settlement quote in writing. It is valid for a stated number of days, because interest keeps running until you pay.
Pay the exact amount on the quote, by the date on it, into the account the lender names in writing. If you pay a few days late, ask for an updated figure first: a small shortfall can leave the account open with a balance of a few rand that keeps attracting fees.
When there is an early termination charge
Only large agreements may carry an early termination charge. Under the Act's categories, these are home loans and other credit of R250 000 or more. For a variable-rate large agreement, the charge may be at most the interest for three months, less any notice period you gave. Most personal loans are below R250 000, so they carry no early settlement charge at all.
Is settling the best use of the money?
Settling early saves the interest and service fees you would have paid for the rest of the term, so it usually pays to clear the most expensive credit first: short-term loans, store accounts and credit cards before a cheaper personal loan or a home loan.
Keep a small emergency fund before you put every spare rand into settling. If an unexpected cost then forces you to borrow again, a new loan at a high rate can undo the saving. Paying extra each month, rather than settling all at once, is a middle way: the balance falls faster and you keep some cash on hand.
Closing the account properly
After you pay, ask for a paid-up letter and keep it. Cancel any debit order or salary deduction for the loan, and check your bank statement the following month to make sure no further instalment was taken. If credit life insurance was part of the loan, confirm that it has been cancelled too.
Your credit report will show the account as settled. A record of a loan repaid in full, early or on time, is one of the things lenders most want to see. Our guide on the monthly repayment shows how much interest a shorter term saves.
Borrowing again
If you need credit again later, compare quotes on the total repayable and borrow over the shortest term you can afford. Our page on personal loans in South Africa lists registered lenders with their amounts and terms.