How much money you can save by paying off your R100,000 loan early

When it comes to repaying any big loan – be it vehicle finance, a home loan or a personal loan – financial experts advise that any time you can afford to make a bigger repayment, you should do so, as reducing the total outstanding amount ultimately means you will pay significantly less in interest.

Lenders provide online calculation tools to provide some indication of how much you will end up paying for your loan over a set time.

However, because the two key components of the loan – interest rate and repayment period – are unique to each individual, they can never give you a true reflection of the loan, without an official application and credit check.

Despite this, you are still able to get a good idea of how much you could save by paying a bit more every month, and reducing the overall term of the loan.

BusinessTech looked at how much consumers would have to pay to take out a R100,000 personal loan from the country’s biggest lenders across three main interest rates – the minimum (10.25%), maximum (27.75%) and a middle ground rate (21%) – and how much they could save by paying the loan back sooner.

Personal loans have several components, which all add to the cost of taking it out. These are:

  • Service fee: a monthly administration fee. Currently this is at a fixed rate of R68.40 per month across all lenders.
  • Interest: a percentage of the amount you borrowed is paid as interest. Currently, the prime lending rate is 10.25%, with the maximum allowed for loans at 27.75%.
  • Initiation fee: a once-off fee for entering into a credit agreement. Currently, this is standard at R1,197 across all lenders.
  • Credit insurance: insurance that covers the provider if death or retrenchment prevents you from repaying the loan.

While each bank’s calculation tools have slightly different results (due to different calculation methods) they all generally fall into the same area when it comes to monthly repayments and totals paid. This was confirmed by using a ‘basic’ loan amortisation formula.

Because of these differences, the information below isn’t a direct comparison between products, but rather an illustrative guide on how payment periods can impact how much you end up paying on a loan.

The tables below illustrate how much you would need to pay to take out a R100,000 loan – and how much you would save if you were to pay back the loan a year earlier.

  • Initial loan amount: R100,000
  • Loan period: 60 months (48 months for a year of saving)
  • Service fees paid: R4,104 (R3,283 for 48 months)
  • Initiation fee: R1,197
  • Credit insurance has not been included.

The calculations are based on the information provided by each banking group via their website. FNB does not have online personal loan calculators available thus was not included.

Basic calculation

48 Months 60 Months
Interest rate Monthly Total paid Interest* Monthly Total paid Interest* 1 year saving
10.25% R2 617 R125 616 R22 333 R2 205 R132 300 R28 196 R5 863
21.00% R3 165 R151 920 R48 637 R2 774 R166 440 R62 336 R13 699
27.75% R3 539 R169 872 R66 589 R3 166 R189 960 R85 856 R19 267

Standard Bank

48 Months 60 Months
Interest rate Monthly Total paid Interest* Monthly Total paid Interest* 1 year saving
10.25% R2 605 R125 040 R21 757 R2 194 R131 640 R27 536 R5 779
21.00% R3 154 R151 392 R48 109 R2 762 R165 720 R61 616 R13 507
27.75% R3 528 R169 344 R66 061 R3 156 R189 360 R85 256 R19 195

Capitec

Capitec’s rates are different to other banks in that it’s minimum interest rate is 16.3%, while it caps the maximum at 27.45%.

48 Months 60 Months
Interest rate Monthly Total paid Interest* Monthly Total paid Interest* 1 year saving
16.30% R2 952 R141 692 R38 409 R2 545 R152 728 R48 624 R10 219
21.00% R3 202 R153 689 R50 406 R2 806 R168 367 R64 263 R13 857
27.45% R3 564 R171 051 R67 768 R3 186 R191 146 R87 042 R19 274

Nedbank

48 Months 60 Months
Interest rate Monthly Total paid Interest* Monthly Total paid Interest* 1 year saving
10.25% R2 671 R128 206 R24 923 R2251 R135 056 R30 952 R6 029
27.75% R3 664 R175 895 R72 612 R3279 R196 718 R92 718 R20 002

Absa

48 Months 60 Months
Interest rate Monthly Total paid Interest* Monthly Total paid Interest* 1 year saving
21.00% R3 202 R153 697 R50 414 R2 806 R168 367 R64 263 R13 849

* Minus service fees


Read: How much you can save just by paying R890 extra into your home loan each month

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How much money you can save by paying off your R100,000 loan early