South African Personal Loans Glossary (A–Z)

A plain-English A–Z of personal-loan terms for South Africans — from APR and application fees to secured vs unsecured loans, prime rate, and variable interest. Use search or the A–Z filter, then tap a term to expand.

A

Answer — What is APR in South Africa?

APR is the total yearly cost of a loan — interest plus compulsory fees — expressed as a percentage of the amount you borrow. Compare offers using APR (not just interest rate) because it standardises costs across lenders and terms in South Africa.

Original definition: The total finance charge (including interest, points, and other finance charges) expressed as a percentage of the amount financed.

Why it matters

Two loans with the same interest rate can have very different total costs.
APR makes “apples-to-apples” comparisons possible across lenders.
Lower APR usually means lower total repayment over the term.

Example (South Africa)

Illustration: Borrow R50,000 over 36 months at 22% APR. Monthly repayment and total cost depend on fees and compounding.

What to do next

List fees included in APR (initiation, monthly service, compulsory credit life).
Compare APRs for the same amount and term.
If affordable, choose a shorter term to reduce total interest.
Improve your credit profile to unlock lower APRs.

Some lenders charge a fee for arranging and processing the application of your loan.

A set payment amount is automatically taken out of your account every month on the day specified.

B

A borrower is a person who receives funds in the form of a loan. The borrower is responsible for the repayment of the funds over a set period of time.

C

Personal property pledged as a guarantee that you will repay your loan. Property such as houses, cars, savings accounts, bonds, or certificates of deposit are commonly used as collateral.

Organisations that collect individual consumer credit information and provide credit reports to potential lenders, employers, landlords, etc., for purposes of aiding in their decision-making process.

A record of your current and fully repaid debts. Your credit history helps banks and other financial services providers determine whether you have a history of repaying debts in a timely manner. This will help determine your creditworthiness.

A credit rating or score is a points system based on your borrowing and repayment history. The credit rating is used by banks and other financial services providers to determine whether a loan should be granted based on your risk profile.

D

An amount owed for funds borrowed. The debt may be owed to individuals, banks, or other financial services providers.

A debtor is an individual or company that owes money.

If a debtor is struggling to make their monthly repayments, a debt administrator (attorney) can apply to the court to extend the loan term. The debt administrator will then determine the money needed for the debtor's basic needs while the rest of the money will be used to pay off their debts. These payments often become a salary deduction in order to ensure that the debts are paid.

Debt consolidation is when a debtor takes out one loan to pay off other smaller loans or debts. This is usually done to secure a lower interest rate. It also makes monthly repayments easier as the debtor is paying off one loan instead of many different ones.

Answer — What is Debt Review?

Debt review is a legal process under South Africa’s National Credit Act where a registered debt counsellor restructures your repayments into an affordable plan. Credit providers agree to new terms, and you make a single monthly payment until debts are cleared.

Original definition: A strategy developed by professionals or debt management organisations to help a debtor manage their debt. These organisations will negotiate the debtor's repayments and ensure that lower interest rates are charged to make the payments more affordable.

Why it matters

Protects you from legal action once in force (subject to court/consent order).
Consolidates repayments into one affordable amount via a Payment Distribution Agent (PDA).
Leads to a clearance certificate when obligations are met.

Example (South Africa)

Illustration: Debts totalling R120,000 are restructured over 60 months into a single monthly payment negotiated by a debt counsellor.

What to do next

Check counsellor registration (NCR).
List all credit agreements and arrears.
Agree to a realistic budget; expect a court/consent order.
Avoid taking new credit during the process.

Default occurs when a debtor fails to make the necessary repayments on a loan.

E

The difference between the current value and the outstanding loans on a property.

F

The total cost of interest and other charges, direct or indirect, the borrower must pay to obtain credit.

An interest rate the borrower locks into at the origination of the loan and does not change during the term of the loan.

G

Gross monthly income is the amount of money earned before taxes or deductions are taken into account.

I

The indicator of current economic conditions used to determine changes in adjustable loan interest rate.

Answer — What is an interest rate?

The interest rate is the price you pay to borrow money, shown as a percentage of the loan amount. In South Africa, personal-loan rates are influenced by your credit profile, the repo/prime rate, loan term, and whether the loan is secured or unsecured.

Original definition: A charge for money borrowed generally stated as a percentage of the amount borrowed.

Why it matters

Small differences in rate can add thousands to total repayment.
Longer terms usually reduce monthly instalments but increase interest paid.
Secured loans often have lower rates than unsecured loans.

Example (South Africa)

Illustration: Borrow R80,000 over 48 months at 20% interest. A small rate change (e.g., 20% → 18%) can noticeably cut the monthly and total cost.

What to do next

Check your credit report and fix errors to improve pricing.
Compare quotes for the same amount and term.
Consider shorter terms if affordable to reduce total interest.

L

An extension of credit subject to a variable interest rate that may be borrowed against when needed and paid back in the same manner and under the same terms as a loan.

A formal document that sets out the rights and obligations of the lender and the borrower.

The loan amount is the amount borrowed from the lender. This is the amount that the debtor will receive in their bank account.

M

In South Africa, if a couple gets married without having an antenuptial contract in place, they will automatically be married in community of property. This means that all of their assets and liabilities are merged into a single estate. The couple will then share everything they earn, including any debts and liabilities.

This is the maximum amount which can be borrowed under the loan agreement.

This is the minimum amount which the lender can borrow under the loan agreement.

The monthly loan repayment is the amount of money that must be paid to the Personal Loan provider every month.

N

The nett monthly income is the amount of money that is left after taxes and deductions have been taken into account.

A written promise to pay a stipulated sum of money to a party under mutually agreed upon conditions. Also called a promissory note.

P

Answer — What is a personal loan?

A personal loan lets you borrow a fixed amount and repay it in monthly instalments over an agreed term. In South Africa, loans may be secured (with collateral) or unsecured, with pricing based on your credit profile, income, affordability and the prime rate.

Original definition: A Personal Loan is a financial contract in which one party borrows a specific amount of money from another party that is to be paid back over an agreed upon period of time. It is a type of loan that can be used when experiencing long- or short-term cash flow problems.

Why it matters

Predictable monthly payments and end date.
Rates and fees vary widely by lender and credit profile.
Unsecured loans are faster but usually cost more than secured options.

Example (South Africa)

Illustration: Borrow R30,000 over 24 months. Use your lender’s disclosure to compare APRs, fees and total repayment before signing.

What to do next

Check affordability (DSR) and credit report.
Compare at least three offers (same amount/term).
Read the loan agreement; note fees and early-settlement rules.

A Personal Protection Plan settles your outstanding loan balance in the event of your death, permanent disability or certain dread diseases.

An amount equal to one percent of the loan amount.

A penalty fee charged to a borrower who pays off a loan before the term of the loan is complete.

The most favourable interest rate charged by lenders on a short-term loan to qualifying customers. Rates (APRs) are established as the prime rate plus an additional amount.

The loan amount borrowed, not including interest.

S

Answer — What is a secured personal loan?

A secured personal loan uses collateral (e.g., savings, investments or a paid-up asset) to reduce risk for the lender. In South Africa, secured loans typically offer lower interest rates than unsecured loans, but the lender can claim the collateral if you default.

Original definition: A fixed interest rate Personal Loan requires collateral or security in the form of a savings account, stocks, bonds, certificates of deposit, etc.

Why it matters

Often cheaper than unsecured options due to reduced risk.
You risk losing the pledged asset if you miss payments.
Approval can still depend on affordability and credit checks.

Example (South Africa)

Illustration: Pledge a R100,000 investment as security for a 36-month loan. Pricing is usually lower than an equivalent unsecured loan.

What to do next

Confirm acceptable collateral and valuation rules.
Compare secured vs unsecured quotes on the same term.
Understand default consequences on the pledged asset.

When a debtor can no longer fulfill his obligations towards his monthly repayments, he can be forced to sell his personal assets. These assets can be sold in order to pay off or lessen his debts. Sequestration can be a lengthy and expensive process.

T