Personal loan scams and how to avoid them
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Bayport Blog

If it’s too good to be true, it’s probably an online loan scam


Published: November 26, 2020
Categories: Personal loans
Tags: Financial Literacy, Financial Tips, Online loans
online-scams-fraud

When you are desperate, it is easy to make poor decisions. It is especially easy to believe someone who promises to make all your money troubles go away. Sadly, these promises are often scams, and instead of helping you, they leave you with an even bigger need to borrow money.

Fake credit providers are all too real in South Africa at the moment. Many people are struggling due to the economic impacts of Covid-19 and the consequences of not knowing enough to manage their money effectively. This combination gives fake credit providers a foot in the door.

Scamsters that promise you a loan in exchange for an upfront fee is nothing new, but they still do good business. Remember: a legitimate credit provider will never ask you for money before lending you money. All the fees and loan costs are included in the final loan amount. If someone wants you to hand over any cash before you can get a loan, stop the conversation, and walk away.

A more recent scam is the promise to clear your record at the credit bureau for a fee. The truth is that there is no quick-fix to a bad debt or credit record. No unauthorised company or person – not even a lawyer – can remove negative data from the credit bureau records, no matter how much you pay them.

Scams usually have common characteristics. Here are signs that the “credit provider” is not honest with you:

  • The promise that you can get a loan without a credit check. Real credit providers need assurance that you will repay your loan, hence they check your credit record and your affordability levels. Only a scamster will show no interest in your credit history.
  • The promise that your loan has already been approved, no questions asked. Once again, no legitimate credit provider will give you a loan without making sure that you can afford it and that there is a good chance that you will repay it.
  • The credit provider puts pressure on you to take the loan. Credit legislation in South Africa does not allow credit providers to force consumers into credit. In fact, the National Credit Act (NCA) allows you to withdraw from a credit agreement within five days of signing it. If you feel pressured, walk away immediately.
  • The credit provider doesn’t want to tell you exactly what the interest rate and fees are. Full, upfront disclosure of the total cost of the loan is another requirement of the NCA. You have to know what you get into before you agree to anything.
  • You cannot get proof that the provider is registered with the National Credit Regulator (NCR). Registration protects the consumer and the credit provider. Someone who is not registered does not play by the rules. If you choose to do business with such a person or company, the law cannot protect you.
  • The lender doesn’t have a website or a physical address. You want to know where and how you can get hold of the person who “sold” you the loan in case something goes wrong. Real companies have a place of business; if they don’t, they are not real.

Now that you know what to look out for, here are four tips to follow if you are thinking about taking out a loan or getting help to rehabilitate your credit record:

  • Check the credit provider’s credentials. It must be a legitimate business registered with the NCR.
  • Do wider research, such as checking out the company’s website, calling the contact numbers provided and finding reviews about it on social media.
  • Check the credentials of any business or person claiming to work for a credit bureau – phone the company directly and check to put your mind at ease.
  • Be aware that legitimate credit providers don’t advertise or communicate with customers on social media or on WhatsApp without disclosing their credentials. They have to give you all the information you ask for before you proceed.

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