The repo rate's the benchmark interest rate at which the South African Reserve Bank (SARB) lends money to commercial banks. The cuts have been made to support South Africa’s fragile economy.
As a result, the prime lending rate has fallen to 7,00%.
If you are repaying debt at a variable interest rate, you will have benefited from lower monthly repayments after these cuts.
This could be a good time to opt for a fixed interest rate, where possible. This lets you continue to reap the benefits of todays’ lower repo rate when it starts to climb in future.
As personal loans are normally offered at a fixed interest rate, now could be the opportunity to combine different personal loans into a single consolidation loan.
It’s also the ideal time to relook your debt and savings. Here are 3 ways you can make the most of low interest rates...
Get control by consolidating your loans
The best way to save from lower debt repayments is to pay off existing debt
If you’re able to get a low, fixed interest rate loan on a new repayment plan, this could help you control your finances better. To see what this might look like, use this loan consolidation calculator.
Reduce, reduce, reduce your debt
The best way to use what you save from lower debt repayments is to pay off existing debt.
Start by making extra payments towards the debt that has the highest interest rate. If you do that, you can pay off the loan quicker, which means you will pay less in overall interest.
Turn the tables on lower interest rates
If you’re left with lower-interest debt, like a home loan, you could use the windfall from the rate cuts to start saving or investing.
If Covid-19 taught us anything during 2020, it’s always a good idea to put money away for unforeseeable times.
You could also look at the savings you’ll make by focusing on paying off your biggest debts first. This is where the record-low interest rate can give you the greatest relief, while it lasts.