7 Signs Of A Personal Loan Scam in South Africa And How to Protect Yourself

Banking

In South Africa, loan scams are on the rise and consumers have lost millions of rands due to fraud.

Since many people are losing their jobs, they turn to personal loans to survive this pandemic.

At the same time, loan scammers also come up with creative ways to scam unsuspecting loan seekers of their hard-earned money.

So today I want to show ways you can easily spot a loan scam and be safe.

1. No Credit Checks

In South Africa, there’s no such as no credit check loans.

Each lender must be interested in your payment history and credit rating score. Whoever shows no interest in your credit check, just know it’s a huge red flag with a high chance of being a loan scam.

Whether it’s a secured or unsecured loan, your credit is very important in the process of borrowing money.

Usually, these kinds of loans are offered at excessively high interest rates and negatively affect your credit score profile.

So no matter how desperate you are, always stay away from the no credit checks loans because you’re going to have a difficult time repaying the loan.

2. Upfront Payment

Another common red flag for spotting a loan scam.

The moment a lender asks for upfront payment to secure the loan, please do not fall for such tricks.

Lenders are supposed to include any additional fees in the terms of the contract of the personal loan agreement. The customer has the right to see all the charges and terms before agreeing to the loan.

3. No Physical Address

The official details of any company or lender are captured in the NCR database.

Use the information to check against what they have on their website.

If the company lacks contact information, then you must know you’re up for a scam ride.

Always do some research about the business before getting in communication with them, find reviews on Google or Hello Peter.

4. Guaranteed Approvals

As indicated earlier, your payment history and credit score determine the approval of any personal loan application.

If the lender promise you guaranteed approval, you must it’s too good to be true.

Your application will go through necessary credit checks and affordability assessment, as obligated to do so by the NCR.

No lender shall over-indebt customers. They work closely with credit bureaus to get your credit report and understand the type of a borrower you are.

So there are no such guaranteed loan approvals – it’s a perfect sign of a loan scam in South Africa.

5. Guaranteed approval

No legitimate lender can guarantee that you will be approved for a personal loan. If a lender claims that they can guarantee approval, it is likely a scam

6. High-pressure tactics

Scammers may try to pressure you into taking out a loan by creating a sense of urgency. They may claim that the offer is only available for a limited time or that there are other people interested in the loan. Legitimate lenders will not pressure you into taking out a loan.

7. Poor website or contact information

Scammers often have poorly designed websites and may not provide a physical address or phone number that you can use to contact them. If the website or contact information seems suspicious, it is best to avoid the lender.

How to Verify a Legit Loan Provider

Always verify the lender or credit provider is registered to operate the business in South Africa.

And it’s simple to spot a legitimate lender.

All credit providers in South Africa must be registered with the National Credit Regulator (NCR).

Visit the credit providers page and search the name of whoever you want to apply for the personal loan with.

Verify credit providers in South Africa

To verify a lender in South Africa, you can follow these steps:

Check if the lender is registered with the National Credit Regulator (NCR): The NCR is the regulatory body for the credit industry in South Africa, and it maintains a register of all registered credit providers. You can search the NCR’s register on their website to see if the lender you are considering is registered.

Check for reviews and complaints: Look for online reviews of the lender and check if there are any complaints against them with the NCR or other consumer protection organizations.

Check for a physical address and contact information: Legitimate lenders in South Africa will have a physical address and contact information that you can use to contact them. Make sure that the address and phone number are legitimate and not fake.

Check the interest rates and fees: Legitimate lenders in South Africa are required by law to disclose their interest rates and fees upfront. Make sure that the rates and fees are reasonable and not excessively high.

Check for transparency and professionalism: A legitimate lender will be transparent about their loan terms and will not use high-pressure tactics to get you to sign up for a loan. They should also be professional in their dealings with you.

By following these steps, you can verify the legitimacy of a lender in South Africa and reduce the risk of falling victim to a loan scam.

Who is most at risk for a loan scam

Everyone is at risk for a loan scam, but some groups may be more vulnerable than others. Here are some examples of people who may be at higher risk for a loan scam:

  1. People with bad credit: Scammers may target people with bad credit who are struggling to get approved for a loan from a legitimate lender. They may promise guaranteed approval or offer loans with high interest rates and fees.
  2. Elderly people: Older people may be more trusting and may not be as familiar with technology and online scams. Scammers may target them with loan scams that appear to be legitimate.
  3. Low-income individuals: People with low incomes may be more desperate for money and may be willing to take out loans with high-interest rates and fees. Scammers may take advantage of this desperation by offering loans that are too good to be true.
  4. Immigrants or non-native speakers: People who are not fluent in the language of the country they are living in may be at higher risk for loan scams. Scammers may take advantage of language barriers and cultural differences to deceive them.
  5. Military personnel: Military personnel may be at risk for loan scams, especially when they are deployed overseas. Scammers may target them with offers for quick and easy loans, which may end up being fraudulent.

It is important to be cautious when considering a loan offer, regardless of your demographic. Always do your research and verify the legitimacy of the lender before agreeing to a loan.

What to do if you think you’ve been scammed

If you think you have been scammed by a loan company, here are some steps you can take:

  1. Contact your bank or credit card company: If you gave the scammers your bank account or credit card information, contact your bank or credit card company as soon as possible to report the fraud and freeze your accounts if necessary.
  2. Report the scam to the authorities: You can report loan scams to the South African Police Service or the National Credit Regulator. Provide them with as much information as possible, including the name of the company and any contact information you have.
  3. Check your credit report: If the scammers obtained your personal information, such as your Social Security number or ID number, they may use it to open accounts in your name. Check your credit report regularly to ensure that there are no unauthorized accounts or activities.
  4. Notify the credit bureaus: If you suspect that your personal information has been compromised, you can notify the credit bureaus to place a fraud alert or credit freeze on your accounts. This will prevent anyone from opening accounts or obtaining credit in your name without your authorization.
  5. Be wary of future offers: If you have been scammed, you may be targeted with future loan offers or other scams. Be wary of any unsolicited offers and always verify the legitimacy of the company before agreeing to any loans or providing any personal information.

It is important to take action as soon as possible if you have been scammed by a loan company. The sooner you act, the better chance you have of minimizing any damage and recovering your losses.