When you are considering getting access to extra cash in the form of a loan, it’s quite possible that there are a number of thoughts that will run through your mind. Should you approach loan sharks or licenced money lenders? Which option will give you fast access to the cash you need?

Here’s what you should consider when deciding between loan sharks or licenced money lenders:

Loan sharks allow you to gain access to money quickly, but it’s never a good idea to use one. A loan shark is someone who lends other people money without a licence to do so. These types of lenders are not registered with the National Credit Regulator (NCR).

Loans offered by loan sharks come with high-interest rates and they have very short repayment terms. They also typically have no paperwork and there is often no record of the loan.

Loan sharks may harass you if you don’t make repayments on time. They will often take some of your assets if you don’t repay the loan.

Licenced money lenders, on the other hand, are accredited and operate transparently. They are also registered credit providers and therefore offer interest rates that are within the limits of the National Credit Regulator (NCR).

Licenced money lenders operate within the regulations of the National Credit Act. By law, licenced money lenders are required to request your bank statements during the loan application process.

Creditors first need to determine if you’re a reliable client. This is why a credit risk assessment is conducted. Your bank statements are also assessed in order to see what current financial obligations you have. For a credit provider, they will want to see how much disposable income you have over a 3 to 6 month period.

An important element of assessing credit risk is looking at your previous payment behaviour. If you have a habit of making late payments credit bureaus will flag you as a risky client. Credit providers want to be assured that you will pay on time and that you fulfil your credit obligations.

Before you apply for a loan, make sure that you do the necessary research.

 

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