Steering Clear of Credit Loan Scams in South Africa – What to Know

Aug 21, 2019

Having bad credit may not seem like much of a big deal if you have yet to make any major purchases. However, there comes a time when you need access to more money than you have. Whether it is to pay medical bills or finance a home, your bad credit score will not work to your advantage. 

A credit score helps a lender figure out the amount of risk they have to take on when putting money in your hands. Bad credit indicates that you don’t have a good history with money. No matter why you failed to keep up with your debt payments in the past, lenders will see you as someone who may not pay them back. If your score is bad enough, legitimate lenders will reject your application, concluding that you aren’t worth the risk. If they do decide to lend you money, they may offer rates that are higher than usual. 

It can be easy to be discouraged in this situation. This is why shady lenders in South Africa take advantage of your vulnerability to offer you seemingly better deals meant to swindle you out of your money. Wondering how to recognize this type of deal? Keep reading.

 

What does a bad credit loan scam look like?

“Lenders” running bad credit loan scams operate in a way that is unlike any legitimate financial institution. Most of the time, they promise to send you the money you need after you have paid them a fee for the transfer. The amount you have to pay for the fee is contingent on the amount you’re looking to borrow, typically ranging anywhere from a couple hundred to several ten thousand Rand. This fee can be called a number of things such as a loan origination fee, loan insurance fee, or even collateral. 

Those who fall for the scam excitedly send money over, expecting to receive their loan and use it to finance their needs shortly. It never comes. The “lender” disappears, never to be found again.

 

What are the characteristics of a bad credit loan scam?

There are a few certain signs that will point to a bad credit loan scam. Let’s take a look.

// Upfront payment request

If a lender asks you for an upfront payment, stay well away. It’s actually illegal for a financial institution to loan you money after you’ve paid a fee. Legitimate lenders don’t require upfront payments. That being said, do remember that if you are taking out a mortgage or financing a car, there may be a down payment or closing costs. You will have to pay, but this will not be a fee for a loan. Instead, it will be deducted from the sum you need to borrow.

// No guarantees from you

What kind of legitimate lender would lend you money without some way to know that you will be paying it back? Credit loan scams will say they can lend you money without thinking twice. After all, you won’t be getting the loan.

// No credit history check

Legitimate lenders check your credit history and financial health. If a lender doesn’t bother to look into any details about your financial history, it’s a cause for concern.

// Request for sensitive information via informal avenues

Confidential information such as your ID number, bank account number, or credit card number should not be requested via informal means like a telephone call. It’s incredibly important for you to avoid communicating this information without a physical copy of the terms of your loan.

Desperate times call for desperate measures. When people are caught between a rock and a hard place, they are often much more susceptible to scam artists who can swindle them out of their money instead of helping them as promised. Make sure that you inform yourself about how to recognise shady loans so that you can avoid them. 

Can’t manage to get a loan? Try improving your credit score by taking out smaller loans that you can manage without a problem. By being diligent in paying them off, you will be improving your score. Who knows? In a year or two, you may be able to get approved for that big loan you wanted to secure your future!

If you’re looking to apply for a personal loan in South Africa, get in touch with us today to see how we can help.