Monday, October 5th, 2015
If you suddenly find yourself in a lot of debt, or need money urgently for an unexpected expense but have a bad credit rating, you may be tempted to borrow money from a loan shark. While loan sharks do allow you to gain access to money quickly, it’s never a good idea to use one.
A loan shark is someone who lends other people money without a license to do so. In South Africa, the National Credit Regulator (NCR) regulates all lenders, and operating an unlicensed money lending business is a crime. This means that loan sharks are illegal. As unlicensed lenders, loan sharks don’t stick to the guidelines of the Credit Act, and so as a result, the terms by which you borrow money from them are highly unfair. A loan from a loan shark usually has similar characteristics: it comes with very high interest rates! It has very short repayment terms, and if you default on these, you’re usually charged an upfront fee. There are very few details given about the terms of the loan, typically with no paperwork and no physical agreement in place. This means that there’s no record of the loan or its accompanying repayments or charges.
Borrowing money from a loan shark is a bad idea because you’ll usually end up paying huge amounts of money in interest just to service the loan. What’s more, because repayment terms are so short, it’s unlikely that you’ll be able to pay back the money in time – and so you’ll be liable for an upfront penalty on top of the large amount of interest. Loan sharks can also be very belligerent and harass if you don’t make your payments in time. And, if you’re struggling to pay off a loan from them, they’ll usually pressure you to borrow more money in order to cover your existing debt.
It’s highly likely that if you borrow money from a loan shark, you’ll end up worse off financially than if you’d never got the loan. So, if you do need to borrow money, investigate alternatives. Start with your friends and family. If they’re unable to help, apply for a loan at a bank or with an accredited lender. Make sure that you shop around for the best interest rate you can find between different lenders so that you’re borrowing money as cheaply as possible. This, together with the protection you’ll get from the National Credit Act, means that there will be no nasty surprises in store with your loan. Getting a personal loan is safe and easy through EC Loans as we only work with accredited lenders. Simply enter your details, get approved from several personal loan providers and then decide on the personal loan that best suits you. Want to get your financial freedom back safely? Get in contact with us and we’ll do our best to help.