Loan sharks and micro lenders offering money to people in South Africa who may be blacklisted or have a bad credit record and having trouble borrowing money from banks are used as an option for those who become desperate. Extreme caution needs to be taken if a person decides to borrow money from this kind of credit provider as often they are operating and using certain methods illegally. Methods used to obtain security against finance are dubious at times and some of these companies are charging phenomenally high interest rates.
Perhaps the biggest reason people turn to loan sharks and micro lending companies to borrow money is when the bank has rejected their application because of a poor credit history and/or judgements against their name. The banks see blacklisted people as being a very high risk to lend to and often (especially with the new laws under the Credit Law Act) will reject applications for finance. Out of desperation, an applicant will then often apply to borrow money from one of these “back street” lenders as they are usually more willing to lend money.
What many fail to realise is that the methods these unscrupulous companies are using to secure the cash they lend 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 such as ABSA, Nedbank, Standard Bank and FNB 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. Micro lenders or loan sharks wont. 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.