Loan sharks that offer borrowing in South Africa target people that are blacklisted or have a bad credit record. And having trouble borrowing money from banks they are seen as an option for those who become desperate. You will be wise to take caution if you decide to borrow money from this kind of lender. Because often they are operating and using certain methods illegally.
Loan Sharks operate in South Africa specifically at locations such as:
- Cape Town
- Somerset West and Strand
- Stellenbosch and Paarl
- Mitchells Plain
- Benoni and Boksburg
- Port Elizabeth
The lenders use methods to obtain security against finance that are dubious at times. And some of these companies are charging high interest rates.
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Why People Use Loan Sharks in South Africa
Perhaps the biggest reason people turn to loan shark companies to borrow money is when the bank has rejected their application. Because of a poor credit history or judgements against their name.
The banks see blacklisted people as being a very high risk to lend to. So often (especially with the new laws under the Credit Law Act) will reject applications for finance.
Out of desperation a borrower will then apply to borrow money from one of these “back street” lenders. Because they are usually more willing to lend money without checking a credit score or asking for proof of income.
What many people in South Africa fail to realize is the methods these unscrupulous companies are using to secure the cash they lend. Which often leads to people losing their house, property, car or whatever else they signed as surety against the finance.
That may seem like the same procedure the banks use when people fail to meet their monthly repayments. The biggest difference here is that the banks will give you some breathing space. And time to sort out your situation if you default on payments.
Loan sharks won’t. In many cases a client skips one payment or is a little late. And the next thing the debt collectors are at the door demanding the property, house, car or whatever it was that was used as surety.
Loan Sharks Online
Loan sharks online can be extremely dangerous. Especially if you have a very bad credit rating or have been blacklisted.
Although it may seem like the only way to get the finance you need, this money is unsecure finance. Therefore there is huge risk borrowing cash from these sharks for both the borrower and the lender.
Unsecure finance can be thought of as signature loans or personal loans. Which are often used by borrowers for small purchases. This means that the lender relies on the borrower’s promise to pay the money back. So this results in the interest rates for these loans generally being higher than that of the banks.
Apart from the higher interest rates there are many more risks when looking to borrow money from South Africa loan sharks online. The interest rates for example on these unsecured loans are not taxable.
In addition some loan sharks may not have the best track record when it comes to the borrower paying back the loan amount. So they may require the borrower to pay back the money before the agreed upon date.
This means that it is important when looking at borrowing cash that you compare their history with other lenders. This is essential, especially for those who already have a very bad credit rating.
More Finance can Lower your Credit Score
For those of you who are blacklisted and who are looking for finance be careful. Because there are loan sharks who are looking to make a quick buck. And who may force you in to an even worse credit rating than you already have.
It is also important to bear in mind that as you normally have repayments over a term period, if you want to repay the loan earlier, you may have to pay penalties.
In summary we have learnt that although there are loan sharks offering people the opportunity to borrow money you have to be careful.
So before you apply for finance from any company make sure you fully understand the terms and conditions.
Therefore if anything looks dodgy you can save yourself a lot of trouble in the long term. Best thing to do is get your credit score higher again and borrow from a registered lender like the banks in South Africa.