We have all heard stories of a dodgy loan provider or loan shark who lends money on unfair and often illegal terms. Unscrupulous collection methods and scare tactics are used to ensure loan repayments. Surely these loan providers can’t be in line with the National Credit Act and cannot be endorsed by the National Credit Regulator? Turns out, you’re right, and often they don’t even claim to be. The question remains – how do we know who is legitimate and who is not? Here’s how to avoid the horror stories.
Choosing The Right Type Of Loan
Make sure you know what the loan is for and which type of loan you need. Different loans are used for different purposes.
A secured loan is usually used for asset purchases, such as buying a home or vehicle. These have longer terms and lower interest rates. Unsecured loans are usually for amount of R5,000 or more. For smaller amounts, consumer can use credit cards or payday loans, but beware that these often have the highest interest rates and relative fees.
If you unsure of what loan to use, do some research online or speak to your bank. Banks often have reasonable interest rates and fees but may not offer the flexibility you require. They are a great place to start though.
Choosing The Correct Lender
Due to various scams and unscrupulous loan provider out there it is wise to do your homework before getting quotes for loans.
- Check that they are a NCR registered credit provider by checking on the NCR website
- Browse online to read reviews on sites such as HelloPeter
- You shouldn’t be asked to do anything like handing over any ID documents, bank card PINs or details or other confidential information when applying
- Often the first indicator of a scam is if the offer seems to good to be true
Make Sure You Can Afford The Loan Repayments
It is very dangerous to apply for a loan that you cannot easily pay back. Draw up a budget beforehand and have a look at your financial situation. List your incomes and expenses on a monthly basis. Use your recent bank statements to ensure accuracy. Be honest with yourself. Now add the new loan repayments to your list of expenses. It is very important that you can afford this loan on top of all of your other expenses.
Check The Terms And Conditions Of The New Loan Agreement
Read through the contract and ensure that there are no stand-out terms that seems out of the ordinary. If you need clarity, you have the right to ask the loan provider what anything in the agreement means. Once the agreement has been signed, it is very difficult to argue the terms.
What If I Cannot Afford The Loan Repayments Anymore?
If you start to struggle paying back any of your debts, here’s what you need to do. Approach your credit providers and notify them of your situation. See if they can extend terms or accept a more affordable repayment until you can get all of your ducks in a row. This will work if your debt situation is temporary. If you have been struggling for a while and have been missing debt repayments every month, you may need a more serious solution.
Approach a debt counsellor for a debt assessment. These debt experts will have a look at your credit report and your budget and analyse your current circumstance. They are then able to formulate a new, affordable repayment plan that aims to get you debt free whilst making monthly repayment affordable. This is done through a debt consolidation loan or a process called debt counselling.
Speak to Vantage today if you have any questions or would like a free debt assessment.