Lenders of online loans in South Africa must comply with the rules and regulations set in place by the National Credit Act. The National Credit Act in South Africa was founded to provide support to consumers and is there to support you. All lenders in South Africa must be licensed by the National Credit Regulator to lend money legally. The rules in place are there for customer protection and this means that you have rights you may not be aware of when applying for loans.
Your right to apply for credit
Every South African adult has the right to apply for loans in South Africa. A lender may choose to deny you a line of credit for reasonable business reasons but cannot unfairly discriminate against you based on race, religion, marital status, social origin, gender, sexual orientation, age, disability, culture, language etc. If you are refused a loan, you are entitled to ask the lender for why, which they need to provide in writing.
Your right to understandable language
Consumers are entitled to be given a quote and credit agreement in the language that he or she reads (within reason). The documents should also be in plain language and easy to understand. If you review your loan agreement and are unsure of the terms used, you can contact the lender for clarification.
Information held by credit bureaus
Credit bureaus hold financial information about you and lenders can check this information when assessing your application. If the information within the report is bad, your credit score will be lowered, which will reduce your chances of being approved for a loan in the future. As a consumer, you have the right to remove previous debt information from your credit report, if all the obligations relating to that debt rearrangement were met.
A lender must also tell you before reporting negative information to a credit bureau. You are entitled to challenge any information that is held on your credit report and the credit bureau, or the NCR, must investigate the accuracy of the information at no cost to you as the consumer.
You are also entitled, by law, to one free credit bureau report per year.
Your right to confidentiality and privacy
Payday lenders in South Africa, as well as other lenders, must protect the confidentiality of the information they keep on record. Lenders must also present you with the option to opt out from further marketing campaigns, including telemarketing, email and SMS campaigns.
Your right to a cooling off period
In some situations, you are entitled to a cooling-off period with your loan. A cooling off period will allow you to cancel your loan (in writing) within five business days of signing – at no cost. This is not a required consumer right with all loans, but some lenders may offer it as part of their service, so it is worth looking out for.
Right to early settlement
You can settle your debts early and at any time, after asking for a statement from your online lender. You should not be charged any fees for early debt settlement on payday loans in South Africa. This doesn’t apply to larger loans, however, like a large African bank personal loans, where you may be liable to pay an early termination fee. All potential costs should be stated in your loan agreement.
Dealing with loan debt in South Africa
The NCR recently published a useful guide to educating consumers on managing debt. Here are the main points from that guide to help you if you believe you are in trouble of slipping into debt.
What is over-indebtedness?
Over-indebtedness is when you are struggling to meet the repayments of your existing debts. For example, if you have recently taken out a new payday loan and found that your outgoings each month are more than your income, you may struggle to pay your debt.
The signs of being in too much debt
The NCR has outlined some examples that may indicate you are or are in too much debt. We recommend you review the below points to see if have recently experienced any of them. If so, it may mean you could benefit from assistance from a debt counsellor.
- You borrow money from others to repay debt. You have skipped some payments on certain accounts to pay others. You hope to make up the payments over the coming weeks or months. You are struggling to pay your bills at the end of the month. You have received letters or notifications from creditors about your missed payments. You have had judgements granted against you. You are thinking of being placed under administration.
If you are in too much debt you have a few options that can help you recover. Firstly, contact your credit providers and discuss your situation. Most will attempt to work with you to renegotiate your payments terms and interest rates. For example, they may lengthen the loan period and reduce your interest so that your monthly repayment amount is lower and more affordable.
If you cannot negotiate better terms with your credit providers you can contact a registered debt counsellor. Debt counselling is a process where you are declared over-indebt and they work with your credit providers to negotiate a restructured payment plan. The restructured plan will involve paying a single, reduced instalment to a Payment Distribution Agency (PDA), who will use the payments to repay your debts to the credit providers. In addition to restructuring your debt and dealing with credit providers, the debt counsellor will provide the following help:
- Budget advice Basic information relative to resolving day-to-day credit problems. Monitor your payments to credit providers Support and after-care services.
Note: All debt counsellors need to be accredited by the NCR to operate.
Not yet in over-indebted but slipping out of control?
You may have read the signs above and thought ‘this isn’t me yet but it may be soon’. If so, there are adjustments you can make to your life that can help reduce your spending and allow you to take back control of your finances. Firstly, it is important to create a spending plan (or monthly budget) and stick to it. Review all your outgoings and see where savings can be made. A few examples include;
- Reduce your spend on ‘luxury’ items each month. These are items that are not essential to your daily life and could allow you to free up money to repay your debts. Luxury items include; Alcohol, Tobacco, Entertainment, Club/Gym Memberships, TV and Gambling.
- Do you drive an expensive car? If you downgrade your car to a less-expensive model, your monthly instalments will decrease and you will have extra money to pay your debts, such as payday loan repayments. You could also consider getting rid of your car entirely and using public transport as this will reduce your outgoings even further.
- Your house may be unaffordable if it is too expensive. You may need to consider selling it or renting lower priced accommodation that will allow you to live within your means each month.
- Review your insurance policies. You may find that you are paying insurance each month when it is not necessary. Insurance policies can be confusing and if you find yourself struggling you could opt for assistance from a financial advisor.
If you have reviewed your outgoings and made adjustments, but still find that your income doesn’t cover your monthly cost, you may want to look at ways to increase your income. You could look for a new higher paid job or, if possible, take on a second job to supplement your income during a time where you need to repay a larger amount each month.
Once you have restructured your finances to a point where you are confident about meeting your debt repayments each month, do not veer away from the plan. Finally, ensure you pay off the most expensive loans first, such as payday loans and credit cards as failure to make these repayments will result in incurring higher charges/fees and increase your chances of spirally into a cycle of debt.
Do not let your debt add stress to your life. There is such a thing a ‘good debt’ as being granted credit can help you manage your cash flow, leverage your wealth and enable you to buy essential things in the event of unforeseen emergencies. If you borrow money and live within your means, the chances of becoming over-indebted are small.