How lenders actually make money
Understanding where a lender’s money comes from tells you a lot about how it will behave — which products it pushes, which term it suggests, and why it would rather you borrowed twice than once.
On short-term credit the initiation fee is a large share of revenue and it is earned per agreement, not per rand. That is the structural reason a lender is happy to advance a small first loan: the fee is charged either way.
Service fees accrue monthly, so a longer term is more profitable per agreement. When a consultant suggests spreading a loan over more months, the lower instalment is genuinely helpful to some borrowers and reliably more profitable for the lender.
Credit life insurance frequently earns the provider a commission. That is not improper, but it is why your right to substitute your own policy is worth exercising and rarely volunteered.
None of this makes lending predatory — regulated credit serves a real purpose. It does mean the lender’s interest and yours diverge on the term, which is exactly the variable to decide for yourself before you walk in.
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.