If you are on the lookout for a loan, and are currently scouring online loan companies, it can be baffling to know which company is the right one. Of course, one of the most important things is that you find a reputable company, and not a loan shark.
There are many loan sharks in South Africa, with IOL saying that South Africa’s private debt crisis cost the country an estimated R500-million a month. It also said that the “financially illiterate working people” got themselves into deeper poverty with more than 100 000 judgments instituted against defaulting debtors a month.
With this in mind, we want to ensure that a) loans are only being obtained when absolutely necessary, and b) applicants understand the terms of the loan and are in a position to repay the full loan, and finally c) when a loan is applied for, it is only obtained from a reputable company, and not an illegal loan shark.
Determine the Necessity of Getting a Loan
Looking at the first aspect of the above, online loan company Wonga suggests only applying for a loan for a ‘good’ reason. For example, obtaining credit for educational fees, a car or for some other reason that is important to you and will help you overall. This is in contrast to getting a loan simply because you want a holiday, or to buy yourself something nice.
Understand the Basics of the Terms
Looking at point b from above, IOL said in their article that some people were ‘financially illiterate’ which means that they simply do not understand the online loan they have applied for, and therefore rack up a lot of debt which they don’t have any hope of paying back. It is important to really get to grips with the terminology of a loan before you apply for it. Many websites, like Wonga’s Money Academy for instance, aim to educate people in a simple and effective way through blogs and easy to read articles that use simple language.
Choosing a Good Lender
And finally when we come to the third point, it is absolutely vital that if you do decide to get an online loan, you choose a reputable company. There are so many loan sharks which can offer fraudulent loans and these may catch you out. The main items to be wary of, include:
- Don’t trust an offer solely based on an email you have received.
- Question whether it is too good to be true – Deals that seem too good to be true are usually just that.
- Make sure the company has a registered address and are regulated, which you can check against the site, and ensure you have a phone number or other form of contact. Speak to them directly. Call the number and see if it reaches the right place.
- Be wary of paying upfront – You may be told that insurance is needed to cover the loan, or that you need to pay the first instalment to activate the loan. Upfront fees are a scam!
- Loan sharks are open to negotiating, whereas formal and regulated lenders are often not. They will also roll over a loan, which would incur a new charge of interest. Loan sharks can also often be intimidating.