Registered lenders safer, cheaper

Mashonisas are unregistered and very expensive

Borrowing from a registered lender might involve more effort on your part and you may have to wait a little longer for the money than if you borrowed from a mashonisa, but it’s much safer and is likely to cost you significantly less. Some mashonisas charge interest of 50% a month.

The maximum that you can be charged by credit providers is capped in regulations under the National Credit Act.

The maximum prescribed interest rates are based on the prevailing repo rate, which is currently 6.75%.

Given the maximum that you can be charged by a lender, the cheapest way to borrow from a registered lender is using a credit card. The maximum interest you can be charged on credit card debt is 20.75% a year.

If you’re a good risk and pay your debt off in full each month, you might qualify for a better rate than that.

A personal loan is your next best bet: the most a lender can charge you for a personal loan is 27.75% interest a year.

Your last, and most costly, option is a micro loan. These are small loans of up to R8 000 and payable over six months.

They attract interest at a rate of 5% a month for the first micro loan and 3% a month for subsequent loans within a calendar year.

In other words, your first micro loan will cost you 30% interest over six months, and your second will cost you 18% – so that’s interest of 48% over 12 months.