In cities and towns across South Africa, there’s a flood of options for getting a loan against a vehicle – but it’s important to know what you’re getting into.

Different types of car pawn loans are structured very differently – and not all lenders are equally reputable.

Here we outline what to consider and which car loans are best in South Africa.

Two main types of car pawn loans

Car pawn loans fall into one of two categories.

1) Asset-based, secured loans

The first category is structured in the same way as a secured personal loan. You provide collateral, in the form of a car, as security for the loan.

The vehicle is available for collection once the loan and agreed interest are paid back.

2) Pawn and drive it schemes

The second category consists of so-called “pawn and drive it” schemes. With this type of transaction, ownership of the vehicle is signed over to the lender.

Essentially, the lender buys your car.

The lender then charges a monthly rental for use of the vehicle – over and above potentially high initiation and administrative fees.

At the end of the contract, the vehicle is sold back to you at the original purchase price.

A warning about pawn your car and still drive it schemes in 2023

In a recent article in The Daily Maverick, the National Credit Regulator (NCR) is quoted as referring to these types of car loans as “scams.”

What’s important to bear in mind is that this type of loan is not recognised as a credit transaction or regulated by the National Credit Act. In some cases, lenders are not even registered credit providers.

This means that they are not properly regulated.

Here’s the riskiest part.

If you fail to pay the monthly rental fee, the car is tracked down and repossessed – and typically, your odds of getting it back will not be high.

So which car pawn loans are best?: what to look for

Aside from avoiding “pawn and drive” schemes, opt for a lender that meets these criteria:

• Is properly accredited
  Check that the lender is registered with the National Credit Regulator (NCR). This ensures that the lender is subject to the provisions and guidelines of the National Credit Act.
• Is transparent about costs
  Fees levied and interest charged should be relayed in an open and transparent manner, before you’re asked to sign an agreement.
• Doesn’t charge hidden fees or penalties
  Make sure there aren’t any hidden administrative fees and that no penalty will be applied if you choose to repay the loan early.
• Has physical branches
  Rather avoid transacting with a credit provider that doesn’t appear to have a fixed, physical address. If you can’t obtain anything except a cell phone number, it’s a bad sign.
• Comes across as professional
  A professional website and professional conduct over the phone aren’t proof that an organisation can be trusted – but they’re a good start. Generally, trust your instincts. If anything “feels off”, walk away.

What we offer at Pawn My Car

Our car pawn loan service is trustworthy, quick and discreet. Our charges are extremely competitive and we don’t levy any hidden fees. Everything is fully transparent – and our loan process does not involve taking ownership of our customers’ cars.

We have been operating in South Africa for many years and have branches in Cape Town, Port Elizabeth, Durban and Johannesburg. Our parent company is registered with the NCR.

Over the years, we have helped hundreds of South Africans access funds they need, quickly and in a trusted manner.

Which car pawn loans are best in South Africa? We think ours are!

For more information, contact us on 0861 112 866 or simply complete and submit our online application form.

Complete an application now