Financial Glossary
Key financial terms used in South African lending, explained in plain language.
A
Administration Order
LegalA court order available to consumers whose total debts do not exceed R50,000. An administrator is appointed to manage your debt repayments. It is recorded on your credit report and...
Adverse Listing
CreditA negative entry on your credit report indicating missed payments, defaults, judgments, or other delinquent credit behaviour. Adverse listings remain on your credit record for a se...
Affordability Assessment
LoansA mandatory evaluation that lenders must perform under the National Credit Act to determine whether a borrower can afford the loan repayments. It considers your income, existing de...
Annual Percentage Rate (APR)
LoansThe total yearly cost of borrowing expressed as a percentage. APR includes the interest rate plus all fees and charges, giving you the true cost of a loan. In South Africa, lenders...
Arrears
LoansPayments that are overdue. If you miss a loan repayment, you are said to be "in arrears". Being in arrears negatively affects your credit score and can lead to legal action by the ...
B
Balloon Payment
LoansA large lump-sum payment due at the end of a loan term, commonly used in vehicle finance to reduce monthly instalments. While a balloon payment makes the monthly cost look more aff...
Blacklisted
CreditA colloquial South African term meaning you have a negative credit record, such as defaults, judgments, or debt review listings. Technically, credit bureaus do not maintain a "blac...
Budget
GeneralA financial plan that estimates your income and expenses over a specific period, usually monthly. A budget helps you track where your money goes, prioritise spending, and ensure yo...
Buy Now Pay Later (BNPL)
CreditA type of short-term financing that allows you to purchase goods and pay for them in instalments, often interest-free if paid on time. Popular BNPL providers in South Africa includ...
C
Clearance Certificate
LegalA document issued by a debt counsellor confirming that a consumer has completed all debt review repayments and is no longer under debt review. The clearance certificate is sent to ...
Collateral
LoansAn asset (such as a car or property) pledged as security for a loan. If you fail to repay, the lender can seize the collateral to recover their money. Loans backed by collateral ar...
Compound Interest
GeneralInterest calculated on both the initial principal and the accumulated interest from previous periods. When saving, compound interest works in your favour as your money grows faster...
Credit Agreement
LegalA legally binding contract between a lender and borrower that outlines the loan amount, interest rate, repayment terms, fees, and both parties' rights and obligations under the Nat...
Credit Bureau
CreditAn organisation that collects and maintains consumer credit information. South Africa's main credit bureaus are TransUnion, Experian, Compuscan (now XDS), and the Information Trust...
Credit Impaired
CreditA status indicating that a consumer has a negative credit record due to defaults, judgments, or being under debt review. Being credit impaired makes it difficult to obtain new cred...
Credit Life Insurance
InsuranceInsurance that covers your outstanding loan balance in the event of death, disability, or retrenchment. Under the National Credit Act, lenders may require credit life insurance but...
Credit Report
CreditA detailed record of your credit history held by credit bureaus. It includes your personal information, credit accounts, payment history, defaults, judgments, and enquiries. You ar...
Credit Score
CreditA numerical rating (typically 0-999 in South Africa) that represents your creditworthiness based on your credit history. A higher score means you are more likely to be approved for...
Credit Utilisation Ratio
CreditThe percentage of your available credit that you are currently using. For example, if you have a R10,000 credit limit and owe R3,000, your credit utilisation is 30%. Keeping this r...
D
Debt Consolidation
LoansThe process of combining multiple debts into a single loan with one monthly repayment, often at a lower overall interest rate. Debt consolidation simplifies your finances and can r...
Debt Counselling
LegalA formal debt relief process regulated by the National Credit Act (Section 86). A registered debt counsellor negotiates reduced repayments with your creditors and a court order pro...
Debt Review
LegalAnother term for debt counselling. Once you apply for debt review, you are flagged at credit bureaus and cannot take on new credit until you have completed the process or a court r...
Debt Snowball Method
GeneralA debt repayment strategy where you pay off your smallest debt first while making minimum payments on all others, then roll that payment into the next smallest debt. This method bu...
Debt Trap
GeneralA situation where a borrower takes on new debt to repay existing debt, creating a cycle that becomes increasingly difficult to escape. Common causes include high-interest payday lo...
Debt-to-Income Ratio
GeneralThe percentage of your gross monthly income that goes toward debt repayments. Lenders use this ratio during affordability assessments. A ratio above 40-50% typically means you are ...
Default
CreditFailure to meet the repayment obligations of a loan. A default is recorded on your credit report and remains for up to two years after the debt is settled. It significantly lowers ...
E
Early Settlement
LoansPaying off a loan before the agreed term ends. Under the National Credit Act, you have the right to settle any credit agreement early. The lender may charge an early settlement fee...
Emergency Fund
GeneralMoney set aside specifically for unexpected expenses such as medical bills, car repairs, or job loss. Financial experts recommend keeping three to six months' worth of living expen...
G
Garnishee Order
LegalA court order (now called an Emoluments Attachment Order or EAO) that instructs your employer to deduct money from your salary to pay a debt. It is a last-resort collection mechani...
Gross Income
GeneralYour total earnings before any deductions such as tax, pension, medical aid, or UIF. Lenders typically ask for your gross monthly income when assessing your loan application.
I
In Duplum Rule
LegalA South African legal principle that prevents the total interest charged on a debt from exceeding the original principal amount. Once interest equals the capital owed, no further i...
Initiation Fee
LoansA once-off fee charged by the lender when a new loan is granted. Under the National Credit Act, the maximum initiation fee is capped and is calculated as a percentage of the loan a...
Instalment Sale Agreement
LoansA credit agreement where you pay for goods in regular instalments over a set period, with ownership transferring to you only once the final payment is made. Common for vehicle fina...
Interest Rate
LoansThe percentage charged by a lender on the outstanding loan balance, usually expressed as an annual rate. In South Africa, the National Credit Act caps interest rates depending on t...
L
Loan Shark (Mashonisa)
GeneralAn unregistered, illegal lender who provides loans at extremely high interest rates, often targeting vulnerable communities. Known as 'mashonisa' in South Africa, loan sharks opera...
Loan Term
LoansThe agreed period over which a loan must be repaid, usually expressed in months. A longer term means lower monthly payments but more total interest paid over the life of the loan.
N
National Credit Act (NCA)
LegalSouth African legislation (Act 34 of 2005) that regulates the credit industry. It protects consumers from reckless lending, sets maximum interest rates and fees, and establishes th...
National Credit Regulator (NCR)
LegalThe government body responsible for regulating the South African credit industry under the National Credit Act. The NCR registers credit providers, credit bureaus, and debt counsel...
Net Income
GeneralYour take-home pay after all deductions (tax, UIF, pension, medical aid). Net income is what actually lands in your bank account and is the key figure used in affordability assessm...
P
POPIA
LegalThe Protection of Personal Information Act (Act 4 of 2013). South Africa's data protection law that governs how organisations collect, store, process, and share personal informatio...
Payday Loan
LoansA short-term, high-interest loan typically due on your next payday, usually for small amounts up to R8,000. In South Africa, payday loans are regulated under the National Credit Ac...
Personal Loan
LoansAn unsecured loan granted to an individual based on their creditworthiness and income, without requiring collateral. In South Africa, personal loan amounts typically range from R1,...
Prescribed Debt
LegalDebt that has become unenforceable because the creditor failed to take legal action within the statutory time limit (usually 3 years in South Africa). Under the National Credit Ame...
Prime Lending Rate
BankingThe benchmark interest rate that South African banks use as a base for pricing loans. Set at a margin above the repo rate (currently repo + 3.5%), the prime rate directly affects t...
Principal Amount
LoansThe original amount of money borrowed, excluding interest and fees. When you make loan repayments, a portion goes toward interest and the remainder reduces the principal.
R
Reckless Lending
LegalWhen a credit provider grants a loan without conducting a proper affordability assessment, or when the consumer did not understand the terms. Under the NCA, a court can set aside a...
Repayment Schedule
LoansA table showing each payment due over the life of a loan, breaking down how much goes to principal and how much to interest. Also known as an amortisation schedule.
Repo Rate
BankingThe interest rate at which the South African Reserve Bank lends money to commercial banks. Changes to the repo rate directly affect the prime lending rate, which in turn affects va...
S
SASSA Grant
GeneralA social assistance payment from the South African Social Security Agency (SASSA) provided to eligible citizens including older persons, people with disabilities, and child caregiv...
Secured Loan
LoansA loan backed by collateral (an asset like a car or property). Because the lender can seize the asset if you default, secured loans generally offer lower interest rates than unsecu...
Sequestration
LegalThe legal process of declaring bankruptcy in South Africa. A court orders your estate to be surrendered and your assets sold to repay creditors. Sequestration remains on your credi...
Short-term Loan
LoansA loan with a repayment period of up to 6 months. Short-term loans (sometimes called payday loans) typically have higher interest rates and are intended to cover urgent, temporary ...
Store Account
CreditA credit facility offered by retail stores that allows you to buy goods on credit and pay them off monthly. Common in South Africa at stores like Edgars, Mr Price, and Woolworths. ...
T
Tax-Free Savings Account (TFSA)
BankingA savings or investment account where all returns — interest, dividends, and capital gains — are completely exempt from tax. South Africans can contribute up to R36,000 per year an...
Total Cost of Credit
LoansThe full amount you will pay over the life of a loan, including the principal, all interest charges, initiation fees, monthly service fees, and credit life insurance premiums. Lend...
Two-Pot Retirement System
GeneralA retirement fund structure introduced in South Africa on 1 September 2024 that splits new contributions into two components: a savings pot (one-third) accessible once per tax year...
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