Category: My Debt

By Tokiso TKay Nthebe Hello Money Trailblazer Let’s talk about something you have probably heard in the news but may not have fully understood: interest rate changes. Specifically, a 25-basis point interest rate cut. Sounds fancy, right? Don’t worry—I’m breaking it down for you in plain language, so you understand how it affects your wallet. What Just Happened? On Tuesday, 3 June 2025, the Central Bank of Lesotho (CBL) announced a 25-basis point interest rate decrease. That’s just a more technical way of saying the main interest rate dropped from 7.25% to 7%. But what does that actually mean for you, especially if you have loans or are planning to take one? Let’s walk through it. What Is the Central Bank Rate? The CBL rate is the rate commercial banks pay when they borrow money from the Central Bank. This base rate influences the prime lending rate, which is what banks use as a starting point when deciding how much interest to charge you on a loan. So, when the CBL rate goes down, the prime lending rate often follows—which means cheaper borrowing for you. 📉 What Is the Prime Lending Rate? This is the rate credit providers (like banks and micro-lenders) charge customers for loans—whether it’s for a house, a car, tuition, or even personal needs. The rate you’re offered is often prime plus a margin, based on your credit score and the type of loan. For example:If prime is 10.5%, and the bank adds 8%, you’ll pay 18.5% per year. Let’s Talk About Nthatsi Meet Nthatsi. She’s considering an LSL150,000 loan to buy a site. Before the rate cut, she was offered 18.75% interest (Prime + 8%). After the 25-basis point decrease, her rate drops to 18.5%. Here’s how it plays out over 60 months: DescriptionBefore Cut (18.75%)After Cut (18.5%)Monthly InstallmentLSL3,870.48LSL3,849.93Total RepaymentLSL232,228.80LSL230,995.80 Savings over 5 years? About LSL1,233. Not massive, but every bit counts—especially when rates go lower. What Should Nthatsi (and You) Consider? Can You Afford It If Rates Go Back Up?Rates are not fixed forever. If they rise, your monthly instalments could go up too. Always ask yourself: Can I still afford this loan if the interest increases by 1–2%? Can You Pay a Bit More Now?When interest rates drop, consider using that breathing room to pay a little extra toward your loan. It reduces the total interest and helps you finish faster. Are There Hidden Costs?Personal loans often come with extras like credit life insurance and admin fees. Make sure you know the full cost—not just the interest rate Final Tips for Borrowers Always read your loan terms and conditions. Review your instalments regularly. Keep your budget flexible in case of rate changes. Try to pay off high-interest loans faster. Lower interest rates can be a small but meaningful win for your money journey. Stay informed, ask the right questions, and don’t borrow more than you need. Until next time—stay trailblazing Tokiso TKay Nthebe is an author, podcast host, financial coach and lead advisor at TKO Financial Wellness & Advisory who is passionate about financial wellness, education and financial planning.

Category: My Debt

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