What is the In Duplum Rule - Saving Grace or Wake Up Call?

Mar 07, 2016
Author: Ean Barnard
Duplum means double, or perhaps double the trouble in the case of interest on loans. Literally translated, in duplum means 'double the amount'.

What is the In Duplum Rule?

The in duplum rule has been part of South African law for more than 100 years, being applied through South African case law from as early as 1830. It was developed in response to considerations of public interest and seeks to protect borrowers from exploitation by lenders who permit interest to accumulate unchecked. It also has the effect of encouraging lenders to exercise their rights to be repaid, promptly and without delay.

How does the In Duplum Rule Work?

This common law rule provides that interest on a debt will stop running when the total amount of interest has grown to an amount equal to the outstanding debt of your loan. The National Credit Act incorporates this legislative rule in the common law of credit agreements and this includes initiation fees, service fees, interest, the cost of any credit insurance, or any other administration charges. Importantly, this rule doesn’t forbid interest from increasing again once a payment has been made or the outstanding interest has been reduced to an amount less than the in duplum limit (your remaining debt). Thus when a payment is made, the rule no longer applies and interest can start running again.

For interest sake.

Hopefully, you’ll never need to be a partaker in the ‘benefit’ of the in duplum rule and only come to know its definition and workings. Perhaps it can be your ‘saving grace’ if you were to default completely on your loan repayments, though, it is not a good place to be if you find yourself in this situation. If you’ve been defaulting on your loan and you find yourself with interest amounting to the sum of your remaining debt (not the preferred situation), you can thank the in duplum rule for saving you in a way.

If you were to get yourself in a situation that the in duplum rule comes into effect on your outstanding debt, your credit score would suffer much damage. Thus, the best way to not get in this situation is to don't. Always ensure that you can afford a loan before applying, and all will be well. There are many resources available to you, make use of them. Here at Fincheck, we trust that you will never get yourself into such a predicament. If you’d like to, you can read more here on the methodology and workings of the in duplum rule, purely for interest sake, pun intended.

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