What is Loan Consolidation - LOAN CONSOLIDATION

LOAN CONSOLIDATION INFORMATION | DEBT PAYMENT PROBLEMS | DEBT CONSOLIDATION ADVICE | DEBT COUNSELING

If you need to borrow money, but can't find a bank that will help you, you could turn to a money lender. But before you take out this type of loan, you need to know what you are entitled to, and what will be expected of you. In the first part of our series on money lending, we consider some of the basics.

In the past if you needed a small loan, or micro-financing, you were often at the mercy of abusive money lenders.

They could charge exorbitant interest on the loans, take away your identity book or your bank card, or organise large amounts to be deducted from your wages or salary without your permission, leaving you with insufficient money to live on - thereby often forcing you to borrow more money simply to survive.

Since in the past there was no regulatory body policing the industry, micro- lenders conducted business in any way they liked, which often resulted in borrowers being mistreated.

But the government has recognised that many people - an estimated 80 percent of South Africans - cannot get access to money through regular banks, and need to make use of money lenders as an alternative source of finance.

Steps have now been taken to clean up the micro-lending industry and make it safer for you. Once you are aware of your rights as a borrower, and the rules that money lenders now have to obey, you can borrow money without fear of being ripped off.

Although the exemption notice does not set a limit on the interest rate that lenders can charge you, it obligates the lender to disclose all the charges and monies payable by you in a written contract.

Micro-lenders who are not registered with the MFRC by law automatically fall under the Usury Act, which places limits on the interest rates that you can be charged. These limits are currently 24 percent a year for amounts below R10 000 and 21 percent for amounts above R10 000. The aim of the MFRC is that every micro-lender should register with the council. If they do not, micro-lenders are constrained by the requirements of the Usury Act.

Bear in mind, registered micro-lenders can range from small corner-shop businesses to large listed companies. They include public companies, close corporations, pawnbrokers, private companies, trusts and co-operatives.

The MFRC's objective is to empower you, the borrower, through education, so that you can make informed financial decisions. The task of the MFRC is to distribute information about money lending issues, and to create awareness about the council's role in protecting consumers.

According to council rules, registered lenders must display their MFRC certificate on their premises and the certificate must show the MFRC logo.

If the certificate is not displayed, you must demand to see it. If the lender cannot show you the certificate, it is possible that that the lender is not actually registered with the MFRC.

Always negotiate for the best deal When you want a loan from a money lender, you obviously have to tell the lender how much money you need to borrow. Find out about the interest rate and any other charges that might apply.

It is a good idea to take notes at the time. Visit at least two other lenders and ask them the same questions. Then compare the information you have received. Select the best option and go back to the lender who offers the best deal. Remember that you have the right to negotiate the best interest rate for yourself.