Financial Education Resources

Interest is the cost of borrowing money. When you take out a loan or use a credit card, the lender charges you interest — usually shown as a percentage per year.

For example, if you borrow R10,000 at 20% interest per year, you'll owe R2,000 in interest after one year (if no payments are made). The longer debt remains unpaid, the more interest builds up.

Why it matters: High interest rates mean debt grows faster. Credit cards and store accounts often have higher interest rates than personal loans or home loans, which is why they can become difficult to manage over time.

In South Africa, debt can "prescribe" (expire) after a certain period if the creditor does not take legal action or if you don't acknowledge the debt in writing.

Generally, debt prescribes after 3 years from the date you last acknowledged it or made a payment. Once prescribed, the creditor can no longer legally force you to pay.

Important: If you acknowledge the debt (even verbally or in writing), make a payment, or sign anything, the prescription period restarts.

Reckless lending happens when a credit provider grants you credit without properly checking whether you can afford to repay it. This is illegal under the National Credit Act.

Examples include:

• Lending money without doing an affordability assessment
• Approving credit when it's clear you cannot afford the repayments
• Not explaining the terms and costs of the agreement properly

If reckless lending is proven, a court may reduce the debt, suspend it, or declare it void entirely.

Debt collectors are allowed to contact you to recover money owed, but they must follow legal rules set out in the National Credit Act and Debt Collectors Act.

What they CAN do:

• Contact you by phone, SMS, email, or letter
• Request payment and explain the debt
• Take legal action if you do not pay

What they CANNOT do:

• Harass, threaten, or intimidate you
• Contact you at unreasonable times (e.g., late at night)
• Disclose your debt to third parties without permission
• Pretend to be law enforcement or government officials
• Take your belongings without a court order

Know your rights: If a debt collector behaves inappropriately, you can report them to the National Credit Regulator (NCR).

Under the National Credit Act, you have several protections when applying for or managing credit:

• Right to information: You must be given clear details about interest rates, fees, and terms before signing any credit agreement.
• Right to affordability assessment: Credit providers must assess whether you can afford the loan before approving it.
• Right to debt review: If you are over-indebted, you have the right to apply for debt review (also called debt counselling) to restructure your repayments.
• Right to a cooling-off period: In some cases, you have 5 business days to cancel a credit agreement without penalty.
• Right to fair treatment: You cannot be discriminated against based on race, gender, age, or other protected characteristics when applying for credit.

Understanding these rights can help you make informed decisions and protect yourself from unfair practices.