APR — Annual Percentage Rate — is one of the most useful tools you have when comparing loans. It is also one of the most misunderstood. Here is what it actually means.
The interest rate alone tells you how much extra you pay on the principal per year. APR goes further: it includes the interest and the mandatory fees (initiation fee, monthly service fee) expressed as a single annual percentage. APR is therefore higher than the headline interest rate.
The representative APR on this platform is 62%. That does not mean a R1 000 loan costs R620 in interest. APR is annualised; the actual cost depends on how long you borrow for.
Under South Africa's National Credit Act, lenders must disclose the APR clearly so that borrowers can compare products on the same basis. Two loans with the same headline rate but different fee structures may have very different APRs.
APR is built for loans repaid over a year or more. For very short loans (5 – 30 days), the annualised number looks alarming even when the actual cost in rand terms is modest. Always look at:
When the platform returns multiple offers, compare them like-for-like. The same loan amount over the same term, with the lowest total repayment, is the cheapest option — regardless of how the APR is quoted.