If you already have the deposit in savings and will not need it during the lease, paying cash usually costs less. If you would have to borrow it, drain your emergency fund or delay the move to raise it, a monthly fee is often the cheaper and safer choice. The worked example below shows where the line falls.
The example
A flat rents for R12,000 a month. The landlord asks for two months' rent as a deposit, so R24,000, plus the first month's rent. We compare four ways of covering that R24,000 over a 12-month lease.
| Option | Cash needed upfront | Cost over 12 months | What comes back at the end |
|---|---|---|---|
| Cash deposit from savings | R24,000 | Close to nothing. The landlord pays you interest at no less than a savings rate. | R24,000 plus interest, less deductions |
| Cash deposit on a personal loan | R0 of your own | About R3,370 in interest, plus initiation and monthly service fees | R24,000 plus interest, less deductions |
| De-Posit at 1% a month | R0 | R2,880 (R240 a month) | Nothing. The fee is not refunded. |
| De-Posit at 2% a month | R0 | R5,760 (R480 a month) | Nothing. The fee is not refunded. |
What the numbers say
Savings versus De-Posit. If the R24,000 is spare cash that would otherwise sit in a savings account, the cash deposit wins. You earn roughly what you would have earned anyway, and you get it back. Paying R2,880 to R5,760 a year to avoid that makes little sense unless you want the money free for something else.
Borrowing versus De-Posit. A loan for the deposit costs about R3,370 in interest at 25% a year over 12 months, before fees, and you carry a R2,281 monthly repayment on top of your rent. De-Posit at 1% costs less than the loan, at R240 a month. At 2% it costs more over the year, but the monthly outlay is R480 instead of R2,281, and you have not taken out a loan.
Time matters. The fee runs for as long as the cover does. Over two years at 2%, you would pay R11,520, nearly half the deposit. The fee can drop as your De-Posit score improves, but on a long lease with cash to spare, the deposit is the cheaper route.
What costs the same either way
- Damage and unpaid rent. With a cash deposit, the landlord deducts them. With De-Posit, the landlord claims and you repay. You are liable in both cases.
- Wear and tear. Not claimable either way. See what a landlord can deduct.
Run your own numbers
- Take your deposit amount and multiply it by 0.01 and 0.02 for the monthly fee range. The minimum is R99.
- Multiply by the number of months you expect to stay.
- Compare that with what the cash would cost you: the interest on a loan, or what you would lose by pulling it from savings or investments early.
The fee calculator does the first step for you. Your actual rate is set when you apply, based on your credit and rental history.
This article is general information about renting in South Africa, not legal advice. For a specific dispute, contact your provincial Rental Housing Tribunal or an attorney.