Personal loan, credit card or overdraft: the true cost of borrowing R20 000
At the legal ceilings, R20 000 over 24 months costs R9 658 on a personal loan and R7 873 on a card or overdraft - but paying the card off at R600 a month costs R21 991, more than the amount borrowed.
In 30 seconds
- A personal loan may charge up to 28.25% a year, a card or overdraft up to 21.25% - the repo rate of 7.25% plus 21 or 14 points.
- Over 24 months, R20 000 costs R9 658 on a loan and R7 873 on a card or overdraft at those ceilings, fees included.
- Paying the card at R600 a month instead takes 70 months and costs R21 991 - the missing end date costs more than the higher rate.
Three ways to borrow the same R20 000
A car repair, a medical bill or a deposit on a flat - when R20 000 has to come from somewhere, most people reach for one of three things: a personal loan, a credit card or an overdraft.
They feel different, but the law sorts them into two groups. A personal loan is an "unsecured credit transaction": a fixed amount, a fixed term, a fixed instalment. A credit card and an overdraft are both "credit facilities": a limit you draw on and repay at your own pace, with a minimum each month.
That split decides the most a lender may charge you.
What the law lets each one charge
The National Credit Regulations cap interest as the repo rate plus a margin. Regulation 42, Table A sets the margin at 14 points a year for credit facilities and 21 points a year for unsecured credit.
The SARB's September 2026 decision raised the repo rate to 7.25%. That puts the ceilings at:
| Type | Interest ceiling | Initiation fee ceiling |
|---|---|---|
| Personal loan (unsecured) | 28.25% a year | R1 050 + VAT |
| Credit card or overdraft (facility) | 21.25% a year | R1 050 + VAT |
The initiation fee is R165 plus 10% of the amount above R1 000, but never more than R1 050 (Table B of the same regulation). On R20 000 the formula gives R2 065, so the R1 050 cap applies - R1 207.50 once 15% VAT is added.
On top of that, lenders may charge a monthly service fee. We use R69 a month in the examples below.
Unverified: the R69 monthly service fee (R60 plus VAT) comes from secondary summaries of the regulations, not a primary text we could read. We have also assumed the initiation fee cap excludes VAT. Your lender may charge less than every ceiling here - most price each borrower by risk - so check your own quote.
The SARB's next decision is due on 19 November 2026. Every ceiling above moves with it.
R20 000 at the ceilings, repaid on a schedule
Assume the initiation fee is added to the balance, equal monthly repayments, and R69 a month in fees.
| Repaid over | Loan: monthly | Loan: total cost | Card/overdraft: monthly | Card/overdraft: total cost |
|---|---|---|---|---|
| 12 months | R2 118 | R5 419 | R2 046 | R4 555 |
| 24 months | R1 236 | R9 658 | R1 161 | R7 873 |
| 36 months | R949 | R14 167 | R871 | R11 346 |
"Total cost" is interest plus the initiation fee plus the monthly fees - everything you pay above the R20 000.
Two things stand out. At the same term, the facility is cheaper: R1 785 less over 24 months, because its ceiling is seven points lower. And the term matters more than the product: stretching the loan from 12 to 36 months cuts the instalment by R1 169 but nearly triples the cost, from R5 419 to R14 167.
Many cards and overdrafts do not charge the full initiation fee. Without it, the card over 24 months costs R6 380.
The catch: a card has no end date
The table assumes you repay the card or overdraft as if it were a loan. Nothing forces you to. A facility only asks for a minimum payment, and the balance can sit there for years.
Here is the same R20 000 (plus the initiation fee) on a card at 21.25%, paid off at a fixed amount each month, with the R69 fee coming out of that payment:
| You pay each month | Months to clear | Total cost |
|---|---|---|
| R600 | 70 | R21 991 |
| R800 | 42 | R12 925 |
| R1 000 | 30 | R9 465 |
At R600 a month the first month's interest alone is about R376, and the fee takes another R69. Only R155 reduces the debt. It takes almost six years, and the cost is more than the R20 000 borrowed. The "expensive" personal loan over 24 months would have cost R12 333 less.
So the cheaper product is only cheaper if you repay it with the discipline a loan imposes on you.
A quick way to choose
- Decide the repayment period first. Pick the shortest term whose instalment you can actually afford every month.
- Ask for the total cost in rand, not the rate. Compare the full amount repayable, fees included, across every offer.
- If you use a card or overdraft, set your own instalment. Work out the amount that clears it in your chosen term and pay that, not the minimum.
- Do not draw on the facility again while you repay it. New spending resets the clock.
- Check the rate you were offered against the ceiling. Anything above 28.25% on a loan, or 21.25% on a card or overdraft, is above the legal maximum at today's repo rate.
Unverified: we understand lenders must give a pre-agreement quote showing the total cost of credit before you sign, but we have not checked the exact rule against the Act. Ask for it in writing either way.
How MaxWealth helps
The debt payoff tool takes the balance, interest rate and monthly payment of each debt you actually have and shows how many months it runs and what it costs in interest. Try your own card at the minimum and at a fixed amount, and the difference shows up in rand.
Sources
- Interest ceilings (repo + 14 points for credit facilities, repo + 21 points for unsecured credit) and initiation fee caps: National Credit Regulations, regulation 42, Tables A and B, as amended by GN 1080, Government Gazette 39379 of 6 November 2015.
- Repo rate 7.25% and next decision date: SARB - Monetary Policy Statement, September 2026.
- Regulator: National Credit Regulator.
- Monthly service fee of R69: secondary summaries of the regulations (see note above).
- All repayment tables: our own calculation, standard monthly-instalment formula, R20 000 plus a R1 207.50 initiation fee, R69 a month in fees.
Education, not financial advice. This post explains how the rules and the arithmetic work. It does not recommend any financial product, and your own situation may differ - speak to a registered financial adviser or tax practitioner before you act. Figures were checked against the linked sources on the date above.