Select a lender cautiously

Business owners and property investors to be cautious when selecting a lender. Too often business owners and property investors in South Africa fall prey to predatory lending, which imposes unscrupulous and abusive loan terms on borrowers, and can swiftly put businesses into debt. Fraudsters posing as licensed credit providers are on the rise according to the National Credit Regulator (NCR), which recently released a statement urging consumers to be more vigilant when selecting alternative lenders.

Key points

There are key points which borrowers need to remember before taking out a loan. First and foremost the borrower must check that the lender is licensed and regulated. It is also crucial to confirm that all relevant information such as the loan terms, payment structure and terms and conditions are in writing, and to ensure that all terms are understood before signing. It is important that borrowers understand what they are signing for and know what the regulations are in terms of surety and cases of default.

Before committing to any lender, ask:

• How long has the lender been operating in the market?
• What type of lending do they offer? Are loans backed by moveable assets such as a car or boat?
• How many clients does the lender have? This will often indicate how reputable they are – for instance, if the lender only has one client, it may mean that they are inexperienced;
• What are the history and current state of the lender’s books?
• Who has financially backed the lender, for instance, a bank or organisation?
• Who prepares the client’s legal documentation and what regulatory body does the lender comply with? It is important to be aware of this information to gauge whether they comply with the NCR regulations.

[Read full article]