South Africans rushing to take out short-term loans are being urged to slow down and ask five important questions before signing any loan agreement.
The warning comes from Nita Morgan, director of Prime Loans, who said millions of South Africans rely on short-term credit every year to deal with emergencies and unexpected expenses. But she says many borrowers make decisions under pressure without checking whether the lender is legitimate or fully understanding the agreement.
“This combination of urgency and unfamiliarity creates a hunting ground for predatory lenders, and rushed decisions can put a desperate person at risk,” Morgan said.
She said taking just a few minutes to ask the right questions can help consumers avoid financial abuse and identify red flags before they commit to a loan.
Is this lender registered with the NCR?
Morgan said every legal credit provider in South Africa must be registered with the National Credit Regulator (NCR).
“Their registration number should appear on the lender’s website and on every loan agreement,” she said.
She warned that fraudsters are increasingly cloning the names and websites of registered lenders.
“Verifying registration independently, rather than trusting a link in a message, is essential.”
What is the total cost of credit?
Morgan said borrowers should never focus only on the advertised interest rate.
“The law requires a lender to disclose, in writing and before signing, every cost that makes up a loan, including the principal, initiation fee, monthly service fee, interest and, where applicable, credit life insurance premium.”
She said consumers should always ask for the total amount they will repay over the life of the loan.
“A lender who cannot or will not provide that figure clearly is not one worth borrowing from.”
Can I comfortably afford the repayments?
Morgan said registered lenders are legally required under the National Credit Act to carry out an affordability assessment before approving credit.
The assessment looks at a borrower’s income, existing debt and essential living expenses.
“A lender that skips this step, in the interest of speed, is breaking the law,” she said.
She warned that taking on repayments that cannot realistically be afforded will only deepen financial problems.
What happens if I miss a payment or need to repay early?
Borrowers should understand exactly what happens if they fall behind on repayments or want to settle the loan early, Morgan said.
She also warned consumers to be alert to suspicious requests.
“Certain requests are a clear warning sign, regardless of what else the loan looks like: a lender asking for a bank card, Sassa card or ID document as ‘security’, or one that pressures a quick signature without giving time to read the agreement.”
“None of these are standard practice among registered lenders, and each one is a reason to walk away.”
Do I fully understand what I am signing?
Morgan said consumers should never feel pressured into signing a loan agreement or debt review documents before reading and understanding them.
“Borrowing money should never feel rushed,” she said.
“If a lender or intermediary pressures you to sign immediately, avoids answering your questions, or discourages you from reading the agreement carefully, it should be treated as a warning sign.”
She said debt review can provide relief for consumers who are genuinely over-indebted, but it also limits access to new credit while the process is under way. Consumers should therefore ensure they fully understand the implications before signing any documents.
Morgan said asking these five questions takes only a few minutes but could save borrowers from falling into debt traps and ensure they deal only with lenders that operate within South Africa’s consumer protection laws.
Sowetan
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