Swapping one need for another South Africa

Swapping one need for another

Apr 28, 2017

A worrying statistic to say the least, the National Credit Regulators have found that there is a large rise in the amount of consumers pawning in their assets, cars in particular, to secure a loan. Putting themselves and their livelihoods at risk, this is allowed but definitely not suggested.

While pawning off a car in order to secure a loan is perfectly legal under the National Credit Act, the NCR warn against it as it places huge risk on the consumer. In a sense putting the car up as collateral, the vehicle could be lost to pawn brokers if consumers cannot repay the debt in time – this could result in a huge monetary loss as usually the loan is for a lot less than the car’s worth. In this case, when the loan is not repaid, the car or asset can be sold to make up the deficit.

In some cases, something to be wary of, many pawn brokers are illegally charging extra fees to consumers in order to get their assets back. With storage fees and other amounts being added, this can end in the consumer having to pay far more than originally intended. However, it is good to note that legally speaking, a pawn transaction is a short-term credit agreement under the NCA that is limited to interest of 5% on the first loan and 3% thereafter. Any added amounts edge on illegal lending, in which case the chance of unfair repayment is very real.

Dealing with loans like this not only put you at risk, but also your assets. With consumers desperate for relief from financial stress, getting a loan in this way can be the last resort for many. Putting your assets on the line to support a loan is a dangerous play, it would be preferable to take out a PayDay Loan with a verified lender, available to consumers without a credit check.

Contact PayDay Loans today for cash loans across South Africa.

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