Borrowers must be weary of fraudulent scammers and unscrupulous money lenders. According to the National Credit Regulator (NCR), “Fraudsters posing as licensed credit providers are on the rise.”
These credit providers offer personal loans at lower than average interest rates. These fake credit providers contact consumers through email or SMS. Once consumers accept the offers, the fake credit providers demand payment of advance fees.
Often property investors in urgent need of capital to secure business transactions are unable to obtain finance from banks due to stringent lending regulations, and therefore turn to private lenders as an alternative. Since 2009 there has been an increased number of non-bank lenders entering the marketplace in South Africa, which has made the access to capital easier.
These fake lenders often pressurise property investors into signing loan agreements in haste or which they do not properly understand and end up accepting loans without conducting the necessary checks on the lender to gauge their credibility.
Three key points to consider before taking out a loan:
- Check that the lender is licensed and regulated.
- Confirm that all relevant information such as the loan terms, payment structure, and terms and considerations are in writing before signing. If any information is unusual or suspicious, ensure you query it with a lawyer who is able to make sense of the details and jargon.
- Understand what you are signing up for and know what the regulations are in terms of surety and cases of default.
Remember that lenders want your loan process to be as seamless as possible, however, unscrupulous lenders want your loan to default.