Taking out a loan against a secured asset, like your car, might seem a good idea when you have a cash-flow problem. But if that loan is a pawn transaction, be very careful. With a pawn transaction, you can be charged up to 5% a month in interest, which is the most expensive form of credit. And since there's no obligation on the pawn broker to carry out an affordability assessment, you have no recourse for reckless lending. Also, be on your guard when dealing with lenders that offer big loans and pass them off as pawn transactions in order to charge 5% interest a month. Isabella Klynsmith, the supervisor in the complaints department at the National Credit Regulator (NCR), says that with a pawn transaction the creditor is limited to lending up to R8,000, even if the value of the pawned property is more than the amount lent. "In the event of credit being extended in an amount exceeding R8,000, it will no longer be a pawn agreement and the credit provider will be required to conduct an ...

BL Premium

This article is reserved for our subscribers.

A subscription helps you enjoy the best of our business content every day along with benefits such as exclusive Financial Times articles, ProfileData financial data, and digital access to the Sunday Times and Times Select.

Already subscribed? Simply sign in below.



Questions or problems? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now