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    As outlined in the National Credit Act, South Africans have certain rights to protect them from predatory lending practices. But what exactly are these practices and how do they hurt consumers? Today we’ll explain just that.

    Defining Predatory Lending

    In essence, it involves taking out a loan with conditions that unfairly impact the consumer, while benefiting the lender. The creditor can create unfair loans through lying to and exploiting the consumer. Often, this is done to uninformed citizens who aren’t aware of their rights.

    Red Flags to Watch Out For

    If you’re trying to figure out whether a loan is abusive or deceptive, look out for these red flags:

    • High interest rates
    • Collateral requirements (such as a house or car)
    • Creditors presenting interest rates as non-negotiable
    • The withholding of terms and conditions (often the “fine print”)
    • Unfair and discriminatory pricing (i.e. lenders charging high interest rates based on demographic information, such as race or economic class, which is illegal)
    • Loan flipping, where you are pressured to take out more debt to finance your existing debt