Financial Glossary
South African financial terms and definitions explained simply
A
Amortization
The process of paying off a debt over time through regular payments. Each payment covers interest and reduces the principal balance.
Annual Percentage Rate (APR)
The yearly interest rate charged on a loan, including fees and other costs, expressed as a percentage.
Asset
Anything of value that you own, such as property, vehicles, investments, or cash.
B
Balloon Payment
A large final payment due at the end of a loan term, commonly used in vehicle finance in South Africa to reduce monthly instalments.
Base Cost
The original purchase price of an asset plus any costs incurred to acquire or improve it. Used to calculate capital gains.
Bond
South African term for a home loan or mortgage. The property serves as security for the loan.
Bond Originator
A company that helps you apply for home loans from multiple banks to find the best rate. Examples include ooba and BetterBond.
Budget
A plan for how you will spend your money, typically on a monthly basis, allocating income to various expenses and savings.
C
Capital Gains Tax (CGT)
Tax payable on the profit made when selling an asset for more than its base cost. In SA, 40% of the gain is included in taxable income for individuals.
Compound Interest
Interest calculated on both the initial principal and the accumulated interest from previous periods. "Interest on interest."
Credit Bureau
Organizations that collect and maintain credit information about consumers. In SA: TransUnion, Experian, Compuscan, XDS.
Credit Score
A numerical rating (typically 0-999 in SA) representing your creditworthiness based on your credit history.
D
Debt Counselling
Also called debt review. A formal process under the NCA where a debt counsellor helps over-indebted consumers restructure their debt payments.
Debt-to-Income Ratio
The percentage of your gross monthly income that goes toward paying debts. Banks use this to assess loan affordability.
Deposit
An upfront payment made when purchasing an asset, reducing the amount that needs to be financed.
Dividends
Payments made by companies to shareholders from their profits. Subject to 20% withholding tax in SA.
E
Effective Interest Rate
The true annual interest rate after accounting for compounding. Higher than the nominal rate when interest compounds more than annually.
Emergency Fund
Savings set aside for unexpected expenses or income loss. Typically 3-6 months of essential expenses.
Equity
The value of ownership in an asset. For property: market value minus outstanding bond. For shares: ownership stake in a company.
F
FICA
Financial Intelligence Centre Act. Requires financial institutions to verify customer identity to prevent money laundering.
Fixed Interest Rate
An interest rate that remains constant for a specified period, providing payment certainty regardless of market changes.
FLISP
Finance Linked Individual Subsidy Programme. Government subsidy for first-time home buyers earning R3,501-R22,000 per month.
G
Gross Income
Your total income before any deductions such as tax, UIF, pension contributions, or medical aid.
Garnishee Order
A court order allowing a creditor to deduct money directly from your salary to repay a debt. Also called an emoluments attachment order.
I
Inflation
The rate at which prices increase over time, reducing the purchasing power of money. Measured by CPI in South Africa.
Interest Rate
The cost of borrowing money or the return on savings, expressed as a percentage of the principal.
L
Levy
Monthly fee paid by owners in a sectional title complex or estate to cover shared expenses like security, maintenance, and insurance.
Liability
A financial obligation or debt that you owe, such as loans, credit cards, or accounts.
Linked Interest Rate
An interest rate tied to the prime lending rate, which moves with the Reserve Bank's repo rate.
M
Marginal Tax Rate
The tax rate applied to your last rand of income. In SA, ranges from 18% to 45% depending on income level.
Medical Aid
Private health insurance in South Africa that covers medical expenses. Contributions qualify for tax credits.
Means Test
An assessment of income and assets to determine eligibility for grants or subsidies, such as SASSA grants.
N
NCA
National Credit Act. Legislation protecting consumers from reckless lending and regulating credit providers in South Africa.
NCR
National Credit Regulator. The body that enforces the NCA and registers credit providers and debt counsellors.
Net Income
Your take-home pay after all deductions (tax, UIF, pension, medical aid) have been subtracted from gross income.
Net Worth
The total value of your assets minus your liabilities. A measure of overall financial health.
P
PAYE
Pay As You Earn. The system where employers deduct income tax from salaries and pay it to SARS on behalf of employees.
PMB
Prescribed Minimum Benefits. A list of 270+ conditions that all medical schemes must cover by law.
POPIA
Protection of Personal Information Act. South African data protection law governing how organizations handle personal information.
Prime Rate
The benchmark interest rate used by banks in South Africa. Currently set at repo rate + 3.5%. Most variable loans are priced relative to prime.
Principal
The original amount borrowed or invested, excluding interest or returns.
R
Rates and Taxes
Municipal charges paid by property owners for services like refuse removal, water, and property rates based on property value.
Rebate
A reduction in tax liability. In SA, tax rebates are based on age: primary (all), secondary (65+), tertiary (75+).
Repo Rate
The rate at which the South African Reserve Bank lends money to commercial banks. Changes affect the prime rate and all linked interest rates.
Retirement Annuity (RA)
A personal retirement savings vehicle with tax-deductible contributions (up to 27.5% of income). Funds accessible from age 55.
S
SARB
South African Reserve Bank. The central bank responsible for monetary policy, including setting the repo rate.
SARS
South African Revenue Service. The tax authority responsible for collecting taxes and administering tax law.
SASSA
South African Social Security Agency. Administers social grants including Old Age, Disability, and Child Support grants.
Sectional Title
A form of property ownership where you own a unit (section) in a complex and share ownership of common areas.
SDL
Skills Development Levy. A 1% payroll tax paid by employers to fund skills training. Shown on payslips but paid by employer.
Stokvel
A traditional South African savings club where members contribute regularly and take turns receiving the pool of money.
T
Tax Threshold
The income level below which no tax is payable. In SA (2024/25): R95,750 (under 65), R148,217 (65-74), R165,689 (75+).
TFSA
Tax-Free Savings Account. Investment account with no tax on interest, dividends, or capital gains. R36,000 annual limit, R500,000 lifetime.
Transfer Duty
Tax payable when purchasing property over R1.1 million. Rates range from 3% to 13% depending on property value.
U
UIF
Unemployment Insurance Fund. Provides short-term relief to workers who become unemployed. 1% deducted from salary, 1% paid by employer.
V
Variable Interest Rate
An interest rate that changes based on market conditions, typically linked to the prime rate in South Africa.
VAT
Value Added Tax. A 15% consumption tax added to most goods and services in South Africa. Some items are zero-rated or exempt.
Related Resources
Financial Calculators
Use our free calculators to apply these concepts to your finances.
View Calculators