Quick re­lief or a

CityPress - - Business -

While the loan may be easy to ob­tain thanks to waiv­ing af­ford­abil­ity checks, you do have to re­pay the loan within 30 days. There are in­ter­est and fees, too. For items un­der R1 000, Pawn Ex­press will charge you a 15% ini­ti­a­tion fee plus VAT, plus 5% in­ter­est.

For ex­am­ple: If you bring in a neck­lace and ask to bor­row R1 000, you will pay a R171 ini­ti­a­tion fee (15% plus VAT on R1 000) plus R50 (5% of R1 000). You will then be ob­li­gated to pay back R1 221 af­ter 30 days.

If you want to bor­row more than R1 000, you pay an ini­ti­a­tion fee of R150 on the first R1 000, 10% on the bal­ance, VAT and 5% in­ter­est.

So, if you bring in your ex­pen­sive watch and Pawn Ex­press lends you R5 000, you pay R171 (ini­ti­a­tion fee, plus VAT on the first R1 000) plus R456 (10% ini­ti­a­tion fee plus VAT on the re­main­ing R4 000) plus R250 (5% in­ter­est). This means you end up pay­ing back R5 877 af­ter 30 days.

While this doesn’t sound like a lot of money, bear in mind that you can use your credit card to draw cash or to pay for items and you gen­er­ally get be­tween 55 and 57 days from banks to pay off the card with­out pay­ing any in­ter­est.

So, if you need to bor­row money over the short term, us­ing your credit card will still be cheaper, pro­vided that you pay back the money be­fore the in­ter­est charges kick in.

If you start get­ting into dif­fi­culty and can­not af­ford to re­pay the loan, Pawn Ex­press says it is pos­si­ble to en­ter into a new agree­ment with the store that you trans­acted with twice more be­fore you have to col­lect the item and re­pay. This will again re­quire that in­ter­est charges be paid to the store be­fore en­ter­ing into a new agree­ment.

When City Press put this be­fore the NCR, it had is­sues with this pol­icy. “The main con­cern we have with this pol­icy is that con­sumers will be charged twice for ini­ti­a­tion fees.

“If Pawn Ex­press wishes to ex­tend the term of the pawn con­tract, they must do so with­out ex­pect­ing con­sumers to con­clude a new agree­ment and to pay ini­ti­a­tion fees again,” says Magolego.

What’s more, if you don’t pay back the loan and don’t make con­tact with Pawn Ex­press re­gard­ing your sit­u­a­tion, they will have the right to place the item you of­fered as col­lat­eral on the store’s re­tail floor for sale.

So, if the item you’re putting up for se­cu­rity is of great value to you or a ne­ces­sity for work, like a lap­top, then you should think twice be­fore en­gag­ing in this sort of deal.

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