Why You Should Never “Pawn and Drive” Your Car
With spiralling costs, a weak rand and comparatively low salaries, many South Africans are struggling to make ends meet. At the same time, financial institutions are tightening their lending policies.
In this context, using a paid up vehicle to secure a short-term, asset-based loan is an attractive option. However, we strongly advise against the many schemes offering to let customers have their cake and eat it.
When something sounds too good to be true, it usually is
Pawning your car to get funds and still being allowed to keep driving it sounds appealing. However, there tend to be distinct disadvantages in terms of what you’ll end up paying, how long and complicated the loan process is and how vulnerable you are to losing ownership of your vehicle.
At Pawn My Car, we keep customers cars in highly secure facilities until loans are repaid. This is what makes it possible for us to offer faster, better value loans at reasonable interest rates, without putting our client’s possessions at unjustified risk.
“Pawn and drive” scams in South Africa
Unfortunately, a number of predatory businesses offering “pawn and drive” schemes in South Africa are currently undermining the asset-based loans industry.
The recent case of Allied Capital
One such predatory lender is Allied Capital, a company that claimed to offer car title loans while still allowing borrowers to continue driving their vehicles.
Thousands of consumers who applied for loans from Allied Capital were charged exorbitant interest rates and fees. These consumers signed ownership of their vehicles over to Allied Capital, and were then required to pay a rental fee to continue driving their vehicles.
In 2016, the Democratic Alliance laid a complaint with the National Credit Regulator (NCR) against Allied Capital for illegal loan agreements and illegal advertising.
Recently, the National Consumer Tribunal (NCT) ruled that Allied Capital’s scheme is unlawful and in breach of the National Credit Act (NCA). The Tribunal ordered Allied Capital to return all vehicles that they “purchased” under illegal agreements and to refund all fees and interest to consumers.
The NCT also ordered Allied Capital to alter its business model or shut down its operations, and to withdraw all advertising that was judged illegal.
Other disadvantages of “pawn and drive” schemes
Although it may seem safe to take a loan against the value of your vehicle if the lender complies with the terms of the National Credit Act, you should beware that most “pawn and drive” schemes require that you sign ownership of your vehicle over to the lender, pay rent to continue driving your vehicle and then have to buy it back from the lender at a later date.
It’s far cheaper to pawn your car with a lender that keeps your car as security only for the duration of the loan, even if you were to end up renting another car in the interim.
The advantages of a loan from Pawn My Car
Pawn My Car is a reputable lender, offering quick, convenient short-term loans against the value of fully paid up vehicles, with no credit checks or lengthy application process.
With a loan from Pawn My Car, you retain ownership of your vehicle, and you can rest assured that it will be returned to you once the loan and agreed interest are repaid. Pawn My Car offers competitive rates and fees, in line with the terms of the NCA.
For more information or to apply for a loan, contact us on 0861 112 866 or simply complete and submit our online application form.