As we’re all well aware (and if not – listen up), loan sharks are not legal lenders. While we understand that times are hard in the financial crisis of this country, when it comes to borrowing money, we need to be wary of biting off more than we can chew.
Debt in South Africa is at an all-time high due to job losses, a constant increase in fuel costs, food price hikes and water shortages. It’s no wonder that everyone is feeling the pinch from month to month and enduring the daily struggle of having credit, has become a part of life. And if you don’t believe me, take a look at these hard-to-believe statistics: Consumers in SA currently owe just north of R1.63 trillion! That paints an extremely bleak picture of what the people of this country are facing a financial year on year. Another stat – approximately 23.45 million consumers make use of credit in some way or form, from a credit card for a home loan. These are crazy figures my fellow citizens, and we’re all contributors towards this problem.
Naturally, this is an enormous concern for the people of South Africa as well as the lending institutions which clearly are at risk when offering out loans. With the country always being on the brink of junk status, there was no question that something had to change, and that change was brought about by the National Credit Act.
The National Credit Regulator is an agency of the Department of Trade and Industry regulates the approval and granting of credit. This Credit Act pulls the hand-brake up in terms of lending to protect us from ourselves. Albeit frustrating when you are in a position where you need the money, however, we all know the type of people who like to borrow because they never seem to have enough money? Well, the theory goes, if they don’t have it this month, where will they be getting the money to pay you back when they’re short each and every month before affording to pay you back? That’s when you discover the stories of individuals using more credit to pay off their loans, and that right there is a frightening reality. It’s far better than, for the country to take matters into their own hands and clamp down on the lending in the first place.
However, as briefly mentioned before, this doesn’t help the individual or family between a rock and hard place with no resource to feed the hungry mouths of their children, so as with all things in demand… there comes supply. And this supply comes in the form of a loan shark.
The Loan Shark
Let’s get one thing straight, illegal lenders have no right to lend any money to anyone at any interest rates. These people prey on desperate individuals and without providing any services or interest in the consumer’s financial well being, they are allowing for people to dig even deeper holes than they’re already in and with interest rates that make repayments virtually impossible to keep up with. So, what ends up happening? The problem spirals and they’re tied in forever. And make sure you don’t miss a payment or two, because unlike the banks who phone you and go about legal ways to reclaim any losses, loan sharks are notorious for their strong-arm tactics when collecting money. They often insist on taking clients’ ID books or important banking cards etc just to ensure you don’t run away, they essentially hold you for ransom, and this is not legal.
If that isn’t enough to ward you off, it’s important to know that there have been many reports of these illegal lenders charging VAT without being registered for VAT. They don’t take into account your income and expenses in the way that banks might ensure that you are able to afford the repayments and in most cases, this process in the loan has been found as missing! All of this over and above exorbitant interest rates
This means, of reckless lending and borrowing is toxic to the struggling individuals. It is not a solution to the problem and 90% of the time is just worsening the problem. The onus has always been on the credit provider to ensure that consumers are able to service new debt when applying for a loan. Protocol and credit checks are in place for a very good reason.
Loan sharks do not abide by the micro-lending rules and this is why they should not be taken lightly. If you’re unsure of the criteria for lending, take heed of the following when you register an application with any lender:
- The maximum amount that may be loaned is R10 000
- Loans should be paid back within 36 months
- Payment cannot be paid back using other forms of credit
- The business must be registered with the Micro Finance Regulatory Council.
Those needing to borrow money where they are turned away from legal lending institutions will go elsewhere, this is true. And the more desperate they are, the less they can afford to concern themselves with micro lending ethics and that is the problem we are faced with.
The point is to educate yourself. Understand that there the legal institutions are legal for a reason and same goes for the illegal lenders. If you are willing to take the risk of getting involved with a loan shark, it’s important to know the notorious facts that come along with them. Always choose the safest option for you and your family and think twice before you sign anything, that said, if you’re ready to go the legal route, here are a few tips to help you:
Know what you’re getting into!
- Get a quote for the debt amount including repayments before signing off on anything
- Disclose honest information where figures are concerned
- Leave greed at the door, only borrow what you need
- Try to pay as much as you can over a shorter period rather than spreading it over the longest term – you will save greatly on your total repayment if you do this
- Applications for credit, insurance, that way you’re covered!
- Create a reasonable budget with all expenses considered, how much can you afford?
- Know your credit score, request it if you don’t
Save! Whatever you can, whenever you can