VAT on loan fees
VAT applies to the fees on a South African loan, not to the interest and not to the principal. It is a small point that causes a lot of confusion, because the fee caps everyone quotes are published excluding VAT while the amount leaving your account includes it.
What you need to know
The practical effect: a R60 monthly service fee costs you R69, and the R1 050 initiation fee cap costs R1 207,50. On a six-month loan that is R54 of VAT on service fees alone.
Interest is a financial service and is not subject to VAT, which is why the split matters when you are reading a quote. A quote that applies VAT to the interest is wrong and should be queried.
When comparing published caps against a quote, make sure you are comparing like with like. A quote showing R60 a month may still add VAT; one showing R69 has included it. The total cost of credit figure has everything in it, which is another reason to compare on that.
What R3 000 over 6 months actually costs
At the NCA maximum for a first short-term loan (5% a month). An illustration, not a quote.
| Line | Amount |
|---|---|
| Amount borrowed | R3 000 |
| Interest (5% × 6 months) | R900 |
| Initiation fee | R365 |
| Service fee (R60 × 6) | R360 |
| VAT on fees (15%) | R109 |
| Total you repay | R4 734 |
| Monthly instalment | R789 |
Cost of credit: R1 734 on R3 000 borrowed. Figures are calculated at the statutory maximum — your own quote may be cheaper, and must be shown to you in full before you sign.
Related
Sources and last checked
- National Credit Act 34 of 2005 and its regulations — Government, as at 10 August 2026.
Page last checked 10 August 2026. Statutory caps and lender terms change — confirm anything you intend to rely on with the provider or the National Credit Regulator. Found something wrong? Tell us and we will correct it.