Credit 101: Honest Payday Loan vs Predatory Lending

Ever been in a tight spot, but not known where to turn?

We all try to spend within our means. But sometimes circumstances outside of our control force our hand.

Short term loans exist to keep you afloat until your next payday. But how can you make sure that a predatory lender isn’t exploiting you in your time of need?

Read on, as below we will discuss how to spot and avoid predatory lenders and get the right payday loan for you.

Short Term Loan

In contrast to a standard loan, short term loans are generally small and quickly repaid by the borrower.

To get you the cash you need as fast as possible, payday loans are quickly processed, and are often paid into your account on the same day.

The borrower is expected to pay the loan back in full within a few months, often in a single installment on their next payday. Loan amounts range from around R500 up to R8000.

Are Payday Loans Bad?

Despite the important role payday loans play for those in need of quick cash, irresponsible and predatory lenders have given them a bad name. Debt Councillors have seen a sharp increase in the number of payday loans taken out by South Africans in financial trouble.

A well-managed payday loan will be transparent and paid off in full within a month, but predatory short term loans will cause financial hardship.

So how can you tell the difference between a reputable payday loan and a predator?

How to spot predatory lending

Always make sure that your prospective lender is NCR registered. This means they are complaint with national law.

Watch for the warning signs below:

Interest Rates & Fees

High annual interest rates are normal on payday loans as they are quickly repaid. You will likely only have a single month’s interest added to your loan. Make sure that the monthly or daily interest rate is an acceptable amount.

If a lender is not transparent with their fee structure, they may be attempting to sting you with hidden fees.

The Term

You should always repay a payday loan as quickly as you can. If a lender is trying to get you to extend a loan, or not offering you the shortest term possible, then they are acting irresponsibly. They may be attempting to string you along to rack up more interest.


A responsible lender will always make sure that you are able to pay back any loan you take out. If they do not ask you to confirm that you have a regular income then you should look for a new lender.

The Right Payday Loan

If you watch out for the warning signs, you will be able to avoid falling into the trap of predatory lending.

Using a registered lender you will be able to get the assistance you need to get to the end of the month with peace of mind.

If you are in need of a payday loan from a reputable lender, we instantly route a single application to multiple lenders throughout South Africa. From there you can view your offers and select the loan that suits your needs.