If you are earning a salary, you have at least in one instance been approached by a friend or a relative who wanted to borrow money.
It is understandable that agreements between friends and relatives are never put in writing and that there are no formalities to the lending ever being met. Where the money is paid back, trust is confirmed. In those instances where the money is not paid back, relationships often suffer.
If you are a person who is known to be quite strong financially, you may find yourself as to be one of those rare individuals who get approached by your investment broker to "invest" a significantly huge amount of money in a new business venture. Very often this new business venture is not part of any of their investment broker's normal portfolio of products on offer.
The reason why many of such investors are convinced to invest the requested amounts is, of course, the promise of repayment with significant added interest or, as it is known in the business world, "return on investment."
When the payments are indeed made with the added interest or returns, it is accepted as how business should be. In those instances where the money is not paid back, legal action is often resorted to because it is definitely not a small amount that has been lost.
Before the enactment of the National Credit Act 34 of 2005, investments such as mentioned above and also instances where private individuals lent money to one another with the agreement that the money shall be repaid with interest were easily enforceable the same as any loan that was made without interest or the promise of return on investment.
In terms of the National Credit Act, however, one may only charge interest (even if you call it "return on investment") if you are a registered credit provider.
So, what is the situation if you are not a registered credit provider?
The answer is that, in terms of this statutory law, such an agreement is null and void and not enforceable. This means that no court in the country will ever be able to assist you to recover such an amount, or to recover the money that you have lent out.
The Credit Act goes as far as to stipulate that in instances where the lender is not a registered credit provider, and it is found that the borrower shall be unjustly enriched if the money is not paid back, the capital amount is then to be paid to the state.
I am certain that if you had known that, you would not be lending out money so easily.
The only instances in which you can still claim back money that you have lent out is in the case of agreements, whether written or not, in terms of which you have lent out the money with the understanding that the capital amount shall be paid back to you by a certain date. The moment you expect to receive interest on the amount that you have lent out, such an agreement is null and void unless you happen to be a registered credit provider.
How many of us will still lend money to somebody if we have to wait a long time for it to be paid back to us without interest?
You are welcome to let me know in the comment section.
