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Finance & Legal Matters

Current Interest Rate

Current Interest Rate

The Prime Lending Rate is currently 8.5% as of July 2012.

What is Interest:

Interest is a fee that is paid when you borrow money, and is calculated on a yearly basis. Generally it is always expressed in a percentage amount through the term of the loan.

To keep it really simple:

If you borrow R100 000.00 at an Interest rate of 13% per annum, you will pay R13 000.00 interest if the loan period is for 1 year. On a typical loan the repayment and interest is due monthly so to pay off R100 000.00 you would have 12 repayments of R9416.667 to clear the loan.

Example:

Loan R100 000.00

Interest R13 000.00

Divided by 12

Equals R9416.667.

This all sounds really simple but it doesn’t work like this because the interest is calculated on the balance of the loan at the end of every month. So the actual interest on R100 000.00 over a year would be R7180.76 with the monthly repayment being R8931.73.

Long Term Loans:

This gets a little more complicated and the use of a loan or home loan calculator is recommended when working out long term loans, links to all the banks calculator can be found in our Homeloans Tip Section.

But to sum it up the repayments on a long term loan are far less.

Example:

Loan R100 000.00

Interest 13%

Loan Period 20 Years

Monthly repayments R1171.58

Total Interest payable over term of Loan R181179.20

Total amount paid over term of loan R281179.20

To Conclude:

The shorter the term of the loan - the less the interest you will pay.  Always take this into account when borrowing money.

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