Avoid The Biggest Pitfall When Getting A Personal Loan 

Feb 29, 2024 | Money

Did you know only 23% of South Africans have any money left at the end of the month? That means a whopping 77% are left flat, stony broke at the end of the month. More worrying is that the average South African sits with R70 000 in debt, according to the findings from Debt Rescue (in 2015).  

What hope do you have of saving any money, let alone managing any emergency situations that might pop up? It’s usually in these circumstances that people feel the clutch of desperation and scramble for a financial solution. You’ve done your best, but it seems like a quick personal loan is your only hope of paying rent, school fees, or medical bills.  

Unfortunately, there are far more lenders out there than we’d care to admit who are eagerly waiting for poor and desperate South Africans. Commonly referred to as loan sharks, these lenders target desperate people so that they can jostle them into borrowing money now, without understanding the consequences later. 

This is the biggest mistake you can make, but thankfully, we have advice to help you avoid getting a bad personal loan.  

It’s Not Private For Your Convenience, It’s Unregulated And Dangerous 

It’s tempting to trust lenders who have all the solutions, proclaiming that they are “private” and therefore able to give you a much better arrangement if you just sign on the dotted line immediately.  

What they’re hiding is the fact that while, yes, they are private lenders, they are also unregulated. And they can be merciless, charging you extremely high interest rates of between 50% – 112%. What hope have you got of keeping up with your repayments when the main goal of their business is to keep you in debt? 

Here’s how to spot these dodgy, high-risk lenders: 

  • The lender doesn’t ask for documents to do a credit score check, like your bank statements, which is illegal and shows they don’t care if you can’t afford the repayments.  
  • The lender claims that you can get a loan if you’re black-listed (not true). 
  • The lender asks for your actual passport, ID, or bank card for security – this is illegal. 
  • The lender pressures you to borrow before an offer expires. 
  • The lender offers to keep the loan “off the record,” which is also illegal.  
  • The lender isn’t registered with the National Credit Regular (NCR)

There’s Hope, If You Know Where To Look 

This information isn’t to scare you off of getting a personal loan. Sure, we don’t want you to go to a loan shark, but the reality is that a personal loan can be an extremely versatile financial tool. You can use this kind of loan to consolidate your debts, finance a home improvement project, or even cover unexpected costs.  

Thankfully, South Africa is home to many reputable personal loan providers who will more than pass our dodgy lenders checklist. To help you discover a few renowned and trusted lenders, we advise you to use our Personal Loan Calculator. This way, you can also compare different loan offers and find a loan with the lowest interest rate and fees from a lender you can trust. 

Essentially, if you’re looking for a personal loan and want to make sure that you don’t end up paying too much in interest, then it makes sense to use a personal loan calculator.  

Feel informed?  

It’s best to think carefully before approaching an unfamiliar lender, and to know the warning signs in advance so that you can spot the flowers from the weeds. We hope this information helps, but truly, if you’re struggling then please talk to an advisor and consider applying for relief if you’re really worried about being able to pay your bills.  

Looking to manage your finances more effectively? Consider exploring AA Money’s personal loan options for a tailored solution that fits your needs. Apply online today at AA Money and take the first step towards financial flexibility and freedom.

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