Sometimes emergencies force us to find a fast cash boost. You may need money urgently to fix a burst geyser at home, pay hospital bills or get car repairs done, and getting a loan is 1 of your options. But it's important to know where to borrow the money so that you don’t leave yourself exposed.

In South Africa, you can get a loan from both registered and unregistered credit providers. A registered credit provider is an authorised lender like a bank. Registered credit providers comply with the National Credit Act (the NCA) and are subject to the National Credit Regulator.

But an unregistered lender is a loan shark or a mashonisa. Although you may be desperate for cash, there's no way we recommend that you go this route.  In fact, we must strongly warn you against it.

That might sound unsympathetic, and yes, we know there are times when it might seem to be the only way out, but it's not a good idea. Here's why:

Unregistered lending is not legal

It is estimated that there are more than 50,000 unregistered credit providers in South Africa, operating from their car boots or back pockets. In other words, they are not regulated according to the NCA and operate under the radar of the law and the Regulator.

These lenders do not consider your unique credit rating or your creditworthiness. They simply give you a loan that comes with exorbitant interest rates, which are way more than the limits prescribed by the NCA. The amount you end up owing will only worsen your financial dilemma. Because they operate outside of the law, they also have vicious collection methods if you miss payments, which is what makes it so dangerous.

The NCA protects you

On the other hand, registered providers abide by the NCA, which imposes caps on the interest that may be charged on loans. For instance, according to the Act, the current maximum interest rate allowed for a home loan is 17,1% per year. This is the money you’ll have to pay the bank for taking out the loan.

Compared to other types of loans, the home loans cap is relatively low. Because we all need shelter, a home loan is seen as a necessity. But the interest cap on personal loans is currently 24,5%. In contrast, loan sharks can charge whatever interest they like, which might push you deeper into debt.  

The digital revolution in banking has made applying for a loan so much simpler, as you have so many channels as options

The NCA also puts limits on the administration fees and initiation fees that can be charged for loans, and insists that the lender explains all these charges to the client in advance, in plain language that is easy to understand. Everything is above board and transparent, while loan sharks won't tell you about the 'extras' until they charge you for them.

To sum up: if you need a loan, you should apply only at a registered credit provider because they:

• will not give you a loan that you cannot afford;
• will offer lower interest rates than unregistered lenders;
• will let you know the total cost of your loan upfront; and
• will be the safer option, legally and physically.

Where do you find a registered credit provider?

You can apply for the loan you need with any of the registered banks or other authorised credit providers. Comparative analysis of the rates offered by multiple lenders will help you decide the optimal rate and repayment term, or you can use our loan calculator to explore different amounts over different terms.

When applying for a loan, you will need the following:

• A copy of your ID
• Proof of income or payslips for the past 3 months
• Bank statements for the past 3 months

The amount you qualify for will depend on several factors, including your credit record. Learn more about maintaining your credit record here. You will also need to prove that you have a stable and secure income to repay the loan and interest.

The digital revolution in banking has made applying for a loan so much simpler, as you have so many channels as options. You can call 0860 103 582 or visit your nearest branch. Or you might find it easier and more convenient to apply online. You can complete a full online application form or request a call-me-back to have a consultant help you with an application. Or you could start the process via the Nedbank Money app; it’s entirely up to you.

Did you know that if you take out a personal loan and open a Nedbank Savvy Plus or Savvy Bundle Account, you can get R200 a month cash back for the duration of your loan? For an affordable loan tailored to your circumstances and value-added extras like cash back, choose the bank that’s best for your money.