Why these questions matter
Taking out a personal loan or a mortgage bond is a common step for South African business owners and buyers—whether you’re financing working capital, a vehicle, or a property. The wrong decision can squeeze cash flow, increase tax exposure or even place personal assets at risk. Below are 10 practical questions to ask lenders and advisers before you commit.
10 questions to ask
1. What is the effective interest rate and how is it calculated?
Don’t accept headline rates. Ask for the annual percentage rate (APR) or total cost of credit that includes interest and all fees. For example, a loan with a 10% interest rate plus large initiation and monthly service fees may have an APR several percentage points higher. Compare APRs across offers.
2. Is the rate fixed or variable—and how often can it change?
Variable rates in South Africa typically follow the prime rate set by banks, which in turn tracks the SARB repo rate. If you’re on a variable rate, ask how frequently adjustments happen and whether there’s a cap. Fixed rates can protect cash flow but may be higher initially.
3. What are all the fees and upfront costs?
For personal loans expect initiation fees, monthly service fees and possibly penalties. For bonds, add valuation, bond registration, attorney and transfer fees. Ask for a full fee schedule and an example of total monthly instalments. Bond registration alone can be several thousand rand.
4. Are there penalties for early settlement or extra repayments?
Many lenders charge a fee if you pay off a loan early or make large extra repayments—this can be significant for fixed-rate agreements. For bonds, ask about settlement administration and cancellation costs. If you expect to clear debt faster, look for flexible terms.
5. How will this affect my credit record and ability to borrow in future?
Confirm that the lender reports to the credit bureaus and ask how missed payments are handled. A single default can harm your credit score and future borrowing. Business owners should also consider the impact on company borrowing if you’re providing a personal guarantee.
6. What affordability checks will be done under the National Credit Act?
Under the National Credit Act lenders must assess affordability. Ask what documents you need (bank statements, tax returns, cash-flow forecasts) and how they calculate monthly repayments relative to your income and expenses. Be realistic about seasonal income volatility if you run a small business.
7. Is the loan secured or unsecured—and what collateral is required?
Personal loans are often unsecured; bonds are secured by the property. If a personal loan requires a personal guarantee or security (vehicle, shares), clarify what can be repossessed. Business owners should avoid providing personal collateral for risky company projects without weighing the consequences.
8. Can I get a repayment schedule and an amortisation table?
Request a repayment schedule showing principal and interest over time. This helps you plan cash flow and see how much interest you’ll pay over the life of the loan. For bonds, ask for examples under different interest-rate scenarios.
9. Are there tax implications or deductible interest?
Interest on loans used for business purposes is usually tax-deductible if properly documented. Interest on a bond is only deductible when the property generates taxable income (e.g. rental or business use). Check with your accountant before deciding on personal versus business borrowing.
10. What insurance or protection is available, and at what cost?
Credit life, income protection and home insurance are commonly offered. These can protect repayments in case of death, disability or job loss, but they add cost and are not always mandatory. Compare standalone insurers with lender-offered products for better value.
Practical next steps
Compare at least three lenders—traditional banks, micro-lenders and fintechs—using the same loan amount and term. Get quotes in writing and use The Business List South Africa to find local loan advisers and mortgage bond attorneys. Finally, run the numbers through your cash-flow forecast so repayments fit realistic business scenarios.
Final tip: Small differences in fees and rates can cost tens of thousands over time. Ask these 10 questions, document the answers and consult an accountant or attorney when needed before signing.