Loans ·
What a loan really costs
Borrow K100,000 over 5 years: K95,000 lands in your account, and you pay back K197,079. Four things decide what your loan costs.
K197,079paid back on a K100,000 loan over 5 years (worked example)
This is part 1 of our loan series: a new part every Tuesday and Friday in November, all built on this same loan, with real numbers.
When you take a loan, you look at the monthly payment. The bank looks at the whole loan. Here is what a typical loan costs from start to finish.
One loan, from start to finish
You borrow K100,000 for 5 years at 30.8% a year. That is the middle rate that banks list for salary-backed loans in the Bank of Zambia table. In this example, 5% is taken up front for fees and insurance.
| The loan | Amount |
|---|---|
| You sign for | K100,000 |
| Lands in your account | K95,000 |
| You pay each month, for 60 months | K3,285 |
| You pay back in total | K197,079 |
| Interest | K97,079 |
| Interest and fees | K102,079 |
For every K1 that lands in your account, you pay back about K2.07.
Four things decide what you pay
- Fees taken up front. The arrangement fee and the loan insurance come off the loan before it reaches you. Here, K5,000 of the K100,000 never lands in your account. The arrangement fee is a one-off charge for setting up the loan. Credit life insurance pays off what you still owe if you die or become permanently disabled, so the debt does not fall on your family; banks usually require it.
- The interest rate. Bank loan rates are linked to the Bank of Zambia policy rate, so your rate can go up or down during the loan. Part 5 shows what that does to your payment.
- The length of the loan. A longer loan means a smaller monthly payment, but more months of interest. The same K100,000 costs K54,407 in interest over 3 years (K4,289 a month) and K144,716 over 7 years (K2,913 a month). Part 3 explains why.
- How fast you pay it off. Interest is charged on what you still owe. On this loan, K1,000 extra a month finishes it 23 months early and saves K42,567 in interest. Part 3 shows how.
Try it with your own numbers
What does your loan cost?
You pay back in total K197,079
- Monthly payment
- K3,285
- Lands in your account
- K95,000
- Interest
- K97,079
- Interest and fees
- K102,079
- Real yearly cost, with fees
- 33.6%
Worked out the way banks do it: equal monthly payments, with interest on what you still owe. Your lender's numbers can differ, so ask for the key facts statement before you sign. Nothing you type is sent or saved.
Before you sign
By law, a lender must tell you the cost of borrowing in writing before you take the loan. Ask for the key facts statement, and find two numbers: what lands in your account, and what you pay back in total.
On Friday
Part 2: How much can a bank lend you? The bank does not start from what you need. It starts from your payslip.
This is a worked example, not the price of any bank. Rates and fees differ from lender to lender and change over time. 30.8% is the middle of the salary-backed loan rates listed by 14 banks in the Bank of Zambia table as at 31 March 2026.