Registered vs unregistered credit providers

There are lots of people who are willing to lend you money – for a price. How do you know who you can trust? One way to reduce the anxiety is to borrow money from a registered credit provider.

The National Credit Regulator (NCR) is a government institution that aims to make sure credit providers lend money responsibly, treat their customers in a fair and legal manner, and follow the National Credit Act. A registered credit provider is a formal credit provider such as a registered bank, clothing / furniture stores or finance house that is registered with the NCR and provides credit in line with strict rules and fair, regulated processes.

Beware the loan shark

On the other hand, informal credit providers like mashonisas (or loan sharks), are not registered with the NCR. This means they are unregulated and operate outside the bounds of the National Credit Act.

Mashonisas usually charge very high interest rates (often 30-50%), which is generally much higher than registered credit providers. With a high interest rate, it can be very easy for your debt to spiral out of control. Mashonisas are also known for keeping your ID until you pay them, which is illegal.

Some mashonisas are more considerate than others but there’s no guarantee that they will follow proper and fair collection processes because they are not accountable to a regulator.

It pays to go for regulation

But if you end up in arrears with a registered credit provider, they’ll often work out a payment arrangement, which is a more affordable payment plan. That’s where the advantage of using a registered credit provider comes in. They can’t threaten you or hold your valuables or ID hostage as a way to make sure you pay them. Registered credit providers are expected to treat their customers in a fair and legal way, and the Regulator ensures that they do.

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