Short Term Loans – South Africa

Avoiding Short Term Loans from Loan Sharks

With the rise of the number of South Africans who have insufficient income to pay their bills and those who have got blacklisted, the loan sharks and their short term loans have gained great popularity. This is not because their credit products are beneficial and affordable, however, but because they are skilful enough to lure people who are desperate and eventually get them into a financial trap. Take a closer look at the differences between the loans from legitimate lenders and the products from illegal ones.


The short term loans from legitimate licensed lenders have interest rate which does not exceed the limit set by the National Credit Regulator (NCR). They set the size and the term of each loan so that it is affordable for the borrower to repay it given their disposable income. The fees are also kept under certain limits thanks to the strict regulations imposed.

The loan sharks work illegally so they disregard the regulations of the NCR completely. They set sky-high interest and fees on their short term loans. They do not care about the size of the disposable income of the borrower. They actually want to take as much of the person's income as they can.


When you borrow money from a legitimate lender, you will have clearly set instalments. If you are unable to pay the instalments in time, you will have to pay a penalty fee. However, you will have the chance to negotiate a loan extension which is fairly affordable. Debt consolidation is also an option. 

When you use the services of loan sharks, they can increase the instalment as they please. If you do not pay your instalments on time, they will charge super high penalty fee. If you ask for a loan extension you may eventually have to repay a sum which is five times larger than the principle.

Now you know how the short term loans from loan sharks work and which red flags to watch out for.