How much interest should you be paying?

The Reserve Bank held a meeting of the MPC and decided to leave the Repo rate unchanged. The Repo rate is the interest rate at which the Reserve Bank lends to the commercial banks, the commercial banks then lend to you at, in general, Repo plus 3.5% also known as the Prime rate. There is some debate at what level Prime should be set and disagreement between the Reserve Bank and the commercial banks over it. However there are maximum interest rates set by the National Credit Act. So what interest rate should you be paying?

• Homeloans Repo X 2.2 + 5% = 20.4%
• Personal loans Repo X 2.2 + 10% = 25.4%
• Unsecured credit Repo X 2.2 +20% = 35.4%

These are the maximum amounts that you may be charged under the terms of the National Credit Act. It is a recession and the cost of credit can be a killer. So check up on all your credit agreements and make sure that you are not paying more for your credit than you should be. There are a number of ways that you can get a better rate of interest if you think that you are paying too much. If you have a homeloan, you can contact a homeloan specialist and see if they can get you a better rate of interest on your homeloan. You can also shop around and compare credit cards, looking for the one with the lowest rate of interest.

If you have a personal loan you may be able to consolidate your personal loan debt into another loan with a lower rate of interest, pay off your existing loan with the new one and pay back the new one at a cheaper rate. The National Credit Act is designed to put the power in the hands of consumers and you should be able to save on your interest. Interest charges make up the bulk of what you will pay back on credit with the interest charges often being larger than the amount lent to you. So if you have a lot of debt, work on it now so that you will be able to get through the recession and honour all of your commitments.

Interest rate decision from Tito Mboweni: