Beware: Loan Sharks on the Hunt for New Victims

Did you know that the average South African household spends three-quarters of their salary to service their debt? More than half of all consumers have experienced a salary cut since the start of the pandemic. 

So it’s not surprising that some consumers, struggling to make ends meet, have turned to loan sharks for financial relief. Borrowing money from a loan shark may seem like the only way out.

These loan sharks have now built sophisticated networks within the local business to lure in more prey. The informal loans they offer can range between 30% and 100% in interest rates, making them extremely expensive and almost impossible to pay back by those who already lack financial resources. 

A study by TransUnion found that 44% of consumers went to loan sharks over the past few months for financial assistance, while 43% reported that they have difficulty paying these back.

 You might have been there yourself.

What are the dangers of loan sharks, and can you avoid them? If you are struggling to make ends meet, avoid shark loans at all costs. There are debt relief options available that will be safer and cheaper.

Why are loan sharks so dangerous?

In short, loan sharks are informal, unlicensed money lenders who charge extremely high-interest rates and who typically target low-income earners; those who have fallen on hard financial times. They typically have a short fuse; they may use threats and violence when you’re unable to pay up. 

Because loan sharks are not licenced, they operate outside the law… and borrowing money from these predators may result in:

• Extremely high interest rates.

• Unfair or bad loan terms.

• Constant harassment if you don’t pay on time.

• Pressure into borrowing more if you can’t pay on time.

Many consumers are reeling from the extra financial stress brought on by the pandemic and are ‘highly concerned’ that they won’t be able to pay their monthly bills on time. Thus, prime victims to loan sharks that will do anything to take advantage of struggling households. 

The SmartWage group has reported that shark lenders are capitalising on the current poor state of the economy. Loan sharks have now started to employ agents to infiltrate businesses to target and recruit co-workers who are struggling financially.

If you’ve already experienced a salary cut, how do you manage to pay back a loan amount plus 30% or even 100% interest rate?

In most cases, you won’t be able to pay back the lender.

One loan shark victim reported that she would skip a day of work on the day her payment was due. She would then borrow money from another loan shark to pay the loan from her workplace.

How do you avoid becoming a victim of loan sharks?

Consumers who are struggling to afford all their monthly bills might consider financial relief options. It is evident that many turn to informal loans as a last resort. However, to avoid falling victim to these loan sharks, it’s important to know that there are alternative debt relief options available that are more secure and structured than informal loans.

One of the best and safest debt relief options available is debt review.

Debt review is a legal process that was introduced by the National Credit Act (NCA) to help over-indebted consumers with their debt. This process is suited for those consumers who are struggling to afford their monthly living expenses while covering all their debt repayments.

If you’ve experienced a salary cut and you’re struggling to afford all your monthly financial obligations, debt review may be a perfect financial solution for you.

The debt review process will allow you to reduce your debt repayments so that you have more money available for monthly household expenses.

The debt review process:

• Only make single reduced monthly debt repayment

• Renegotiate lower terms with all your creditors

• Receive legal protection on your assets and harassment from your credit providers

• Receive a personalised monthly budget

This process has helped thousands of consumers get their finances back on track during the pandemic. Debt Rescue is the leading debt counsellor in South Africa. Contact us today before turning to informal, illegal, predatory, and unscrupulous lenders.

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