Consumer debt first aid: Understanding unsecured loans

Unsecured lending is a controversial topic in South Africa. It sits in a very uncomfortable place where there is clearly both demand and need for it, but at the same time it has caused some serious social problems.

According to data from the National Credit Regulator unsecured lenders last years embarked on a lending spree in the months before caps to interest rates and fees came into effect.

In the six months after government issued proposed caps to charges on loans, unsecured credit ballooned by almost 30%.

Reana Steyn, the Deputy Credit Ombud, explains how this all works.

On the one hand there are unregistered lenders.

Those we call loan sharks...and we do not have stats for that because we don't know who they are.

Reana Steyn, the Deputy Credit Ombud

Then there is the unsecured market where statistics are available.

Unsecured lending refers to all the personal loans, the microloans, that are granted to consumers by our regulated credit providers. And who provide the statistics of those loans to the National Credit Regulator (NCR).

Reana Steyn, the Deputy Credit Ombud

That's where we saw this huge jump. In the unsecured lending.

Reana Steyn, the Deputy Credit Ombud

Steyn says there were regulations in place and these lenders had to comply with the Act as it existed.

It did have prohibitions against reckless lending. They did have checks and balances in place. Maybe not as strict as they could have been, but they still had to comply with all of those rules of the NCA when they lent to consumers. So how it came about that so much more was lent out...is a bit of a mystery.

Reana Steyn, the Deputy Credit Ombud

South Africans are drowning in debt. This according to the latest quarterly reports released by the National Credit Regulator (NCR)

Ten million of the 24 million credit active South Africans are in arrears or struggling to pay their monthly debt repayments, when it comes to personal debt.

Listerners called in with a myriad of questions for the deputy Ombud, and she provided invaluable information and advice.

If you are drowning in debt and need to understand what your options are, please contact: creditombud,org.za ombud@creditombud.org.za Text 'help' to 44786

Listen to the full conversation below:


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