Reviews

Debt review is a financial process designed to assist individuals in managing their debts and avoiding bankruptcy. It involves a structured repayment plan overseen by a debt counselor and can last for several years, typically up to five. However, individuals under debt review may still find themselves in need of loans for various reasons, such as emergencies or essential expenses. In this article, we will explore the possibilities of obtaining loans while under debt review, considering the different scenarios and potential consequences.

Can a Person Under Debt Review Get a Loan?

The ability to obtain a loan while under debt review largely depends on several factors:

• Debt Review Stage: Individuals at different stages of the debt review process may have varying degrees of success in securing loans. Those who have successfully completed their debt review and have a clearance certificate generally have better chances.

• Debt Review Progress: Lenders may consider how far you are into the debt review process and whether you’ve been consistently making payments. If you’ve made substantial progress and have a manageable debt repayment plan, lenders might be more willing to extend credit.

• Secured vs. Unsecured Loans: Secured loans, backed by collateral, may be more accessible to those under debt review since they pose less risk to lenders. Unsecured loans, on the other hand, are harder to secure in this situation.

• Lender’s Policies: Each lending institution has its own policies regarding lending to individuals under debt review. Some may be more accommodating, while others might have stricter criteria.

• Credit Score: A person’s credit score plays a significant role. If the individual has improved their credit score during the debt review process, it can enhance their loan eligibility. Debt review can negatively impact your credit score, making it challenging to qualify for traditional unsecured loans from banks or major financial institutions. However, if your credit score remains somewhat intact or if you’ve improved it during the debt review process, you may have a better chance of approval.

• Co-signers or Guarantors: Having a co-signer or guarantor with a strong credit history can increase the chances of loan approval.

Will a Debt Review Affect Your Loan Application?

Yes, a debt review can affect your loan application in several ways:

• Impact on Credit Score: The debt review process typically involves reduced monthly payments and the restructuring of debts, which can initially lower your credit score. Lenders may see your low credit score as a risk.

• Length of Debt Review: The duration of a debt review can extend over several years, and this ongoing commitment may deter some lenders from approving your loan application.

• Limited Access to Credit: While under debt review, individuals may be prohibited from taking on new credit, making it challenging to secure loans during this period.

• Interest Rates: Even if you’re approved for a loan, the interest rates may be higher due to the perceived risk associated with your debt review status.

Are There Loans for People Under Debt Review?

Yes, there are loans available for people under debt review, although the options may be limited and come with certain conditions:

• Secured Loans: Home equity loans or car title loans, which are secured by assets, may be more accessible because the collateral provides security for the lender.

• Personal Loans with Guarantors: Some lenders may approve personal loans if you have a creditworthy guarantor willing to co-sign the loan agreement.

• Peer-to-Peer Lending: Online peer-to-peer lending platforms may consider your loan application based on individual investors’ risk tolerance, potentially offering more flexibility.

• Microloans or Payday Loans: These small, short-term loans often have fewer credit requirements, making them more attainable for those under debt review.

• Credit Unions: Credit unions, which are member-owned financial institutions, may be more lenient in their lending criteria compared to traditional banks. If you’re a member of a credit union, you must understand their loan options.

Conclusion

Securing loans while under debt review is undoubtedly challenging, given the potential impact on your credit score and the cautious lending practices of traditional banks. However, it’s not impossible.

By exploring alternative lenders, considering secured loans, and improving your credit score during the debt review process, you can increase your chances of obtaining the financial assistance you may need.

Remember to carefully evaluate the terms and interest rates of any loans offered and, if possible, consult with a financial advisor to make informed decisions that align with your financial goals and circumstances.

You and your loved ones might be protected against financial loss by having a life insurance policy. It may also be used as security for a loan. While having a life insurance policy can help you with lenders, there are a few things to think about before you cede your policy to pay for a loan.

What is a Life insurance policy?

Insurance is a contract wherein the insurer or assurer agrees to pay a specific beneficiary a certain amount of money if an insured individual passes away. Other cases, such as terminal disease or critical sickness, may also require financial support in payment, depending on the terms of the contract.

Loans against life insurance are only possible on whole and universal life plans that feature a cash value element. Insurance plans are purchased with the sole intent of paying claims should an accident or incident prevent you from working. Your monthly premium payments ensure that the insurance provider can cover these claims.

Your life insurance policy is extremely significant because it ensures that your family will be financially supported even if you are no longer able to do so. However, your life insurance policy is only valuable to your beneficiaries after your death and cannot be converted into cash. As a result, it cannot be utilised as a loan surety, sometimes.

Can I take loans against life insurance policy in South Africa?

Yes, only permanent life insurance plans with a cash value element, such as whole and universal life, are eligible for life insurance loans. The cash value of your coverage increases over time. You can use it as collateral when you have enough (minimums vary by insurer) to ask your insurance company for a loan.

How soon can I borrow from my life insurance policy?

Once a life insurance policy has accrued enough cash value to allow you to take out a loan in the required amount, you can borrow against it.

The length of time it takes to borrow money from a life insurance policy varies on the type of policy and how quickly cash value is built up. The cash worth typically takes time to increase. It frequently takes years or even up to a decade to accumulate enough cash value to make borrowing profitable.

What is credit life Insurance?

In general, credit life insurance is a sort of life insurance that might assist in repaying a loan if you pass away before the loan is entirely returned by the terms stated in the account agreement. This is an optional benefit. When acquired, the cost of the insurance could be tacked onto the loan’s principal.

How much can I borrow from my life insurance policy?

For instance, you often can’t borrow money until you’ve built up a certain amount of cash worth. Additionally, you’re typically restricted to a specific proportion, typically 90% to 95% of your cash value balance.

A life insurance loan could not be sufficient to meet your demands, depending on your cash value. To find out how much you can borrow, review your policy and speak with your life insurance agent.

Conclusion

If you need a loan, there are several places you can go, including banks that are authorised credit providers and occasionally friends and family. When applying for a loan, compile a list of your assets (except your life insurance policy) in case you need to use them as collateral. You should also be aware of the loan’s terms, including the interest rate and the due date or dates for repayment.

In 2019, consumers lost up to $1.9 billion collectively to fraudulent practices. Most times, unsuspecting consumers are lured into attractive loan options which often tends to be false. These fraudsters take advantage of the ignorance of unsuspecting and somewhat financially desperate customers to prey on them. This article contains brief enlightenment on everything there is to know about loan scams.

What are loan scams?

Loan scams are fraudulent businesses that are out to exploit consumers who are searching for quick solutions to  financial problems. A great percentage of them are found online with no storefront or physical address.

They’re often illegitimate business fronts that offer to lend money but in reality, take money from people. These sites/businesses can be popular and they mostly seek out the consumer with promises of ‘free’ money.

Common types of loan scams

Most types of loan scams seek to either subtract money upfront or pose with a mouth watery term/condition just to lure unsuspecting customers. Here are some of the most common forms of scams.

Loan fee scam

Scammers may try to offer you a low-cost loan in exchange for hundreds or thousands of dollars of fees upfront. Once these fees are received, they will cut off contact without providing any funds. These fees could also be demanded sometimes through cash, gift cards or wire transfers.

No-credit-check scam

While there are some legitimate personal loan lenders that consider more than just your credit score when approving you for a loan, some scammers will promise funds without checking your credit score at all. This is a red flag, since your credit score is usually one way lenders assess the risk of lending to you.

Private student loan forgiveness scam

Some forms of student loan forgiveness are available through the federal government for federal student loans. There are few ways to have private student loan debt forgiven. However, If a company promises to forgive your student loans, it’s likely a scam.

Top 5 ways to avoid loan scams

While this isn’t a comprehensive list, some of the most common ways to spot a loan scam include:

The lender isn’t interested in your payment history

Truly reputable lenders make it obvious that they must look at your credit, sometimes getting financial reports. Most legitimate lenders need to know whether you have a great credit history to make sure that you’ll be just as diligently.

Keynote; Be sure to do your research and read the fine print. Also  Make sure you’re working with a lender that’s interested in your previous financial history.

The lender isn’t registered in your state

Every country/state requires that lenders and loan brokers register with the financial regulatory body in the state where they operate. If a lender you’re interested in does not list any registered states, you could be dealing with a loan scam.

Keynote; Check registration as it is a key step to ensure that you’re dealing with a reputable company. 

The lender demands a prepaid credit card

Some scammers tend to require prepaid debit cards from borrowers. They claim that they need it for insurance, collateral or fees. This is a scam. Legitimate financial institutions do not require these details to charge fees. Instead, those charges are deducted upfront from your loan. 

Keynotes;  legitimate lenders will never ask for money upfront. Application and other fees are typically deducted from your total loan amount.

The lender’s website isn’t secure

When visiting a lender’s site, be sure to look out for some key things. Some the things to look out for are; 

• A padlock symbol on any pages where you’re asked to provide personal information.
• A URL that begins with “https” instead of “http” (the additional “s” stands for “secure”).

Keynotes;  Be sure to review the loan websites you visit. Look out for indicators that they’re secure. These security measures not only make it more difficult for hackers to steal your information, they also indicate that you’re dealing with a reputable business.

Some other indicators that a loan providers might be fraudulent when;

• The lender has no physical address.
• The lender pressures you to act immediately.
• They are probably fraud when they guarantee approval.
• Lastly, when they are not transparent about their fees.

Avoid loans with all these characteristics and you might have a smooth loaning experience avoiding fraudsters.

Conclusion

If you need a loan of any kind, be sure to do your research and compare multiple lenders. This act puts you at advantage as you get to find and go with the most trusted option.

Travelling is something many people dream about. Most times, they either do not have enough money to finance their fantasies or they’d rather use the cash for something else. With travel loans, you can now access enough funds to make that trip you have always wanted to go on. Within this article, we will describe all there is to know about travel loans so be sure to keep your eyes glued.

What is a Travel loan?

Travel loans are loans taken for incurring travelling expenses. Most lenders in the market provide travel loans for both domestic and foreign travels. Young working professionals often look forward to taking a break from their busy work lives. Most of them consider travelling to a new place for a vacation. 

Who is Eligible for a travel loan?

Because travel loans are like personal loans, only working professionals qualify for them. Some lenders in the market provide these to self-employed professionals with a steady income. The most common eligibility for these loans are listed as follows:

• The applicant must be at least 21 years of age.
• Salaried professionals must be employed in the job for at least 6 months before they can apply for these loans.
• Your credit score must be acceptable to the lender. Most lenders prefer individuals with a credit score of at least 700.
• Most banks have specific income criteria for applicants to avail these loans. It is better to have a monthly income of at least Rs.20,000.
• To avail pre-approved loans, the individual must already be a customer of the concerned bank.

What do I need to apply for a travel loan?

Most of the top credit providers in the market offer travel loans to customers with very minimal documentation. However, some crucial documents must be submitted (even electronically) while applying for travel loans. Some of these documents includes;

• Identity proof
• Address proof
• Income proof (payslip or IT returns)
• Photographs

The exact documents required by companies for travel loans may vary depending on the company. Therefore, it is important to enquire more and even visit the desired company’s website before applying.

How to apply for a travel loan?

The application process for travel loans mostly depends on the financial company itself. Meanwhile, the following process is peculiar among a great percentage of them;

• Applying for a travel loan is a very simple process. Most banks now provide online applications for personal loans.
• You can simply visit the official website of the lender and fill up your personal details to apply for a travel loan.
• Submit your documents online and get instant approval from the company.
• You may also visit the branch office of the lender and speak to an official for a loan application.
• If you need any help in the loan application process, you may check with the customer service department of the lender.

Things to Consider before Applying for Travel Loans

You must consider the following points before you applying for a travel loan for the purpose of travelling:

• First, you need to estimate the correct budget for your travel before applying for a loan. Do check the accommodation costs, ticket costs, food expenses, etc., online while applying for a loan. It is advisable to set the loan amount at least 20% higher than the trip budget you have estimated.
• Since travel loans are personal loans, they are offered with higher interest rates than home loans and other secured loans. There’s a need to research the market to find the best loan product suitable for your travel needs.
• Make sure that the EMI amount fits within your monthly budget. If you cannot afford the EMI within your monthly budget, you might face difficulties repaying the loan to the lender.

Top 4 platforms that offer Travel loans in South Africa

Below is a list of reputable loan agencies that offer travel loans;

• Standard bank
• Directaxis loans
• Justgo loans
• Bid vest bank

Conclusion 

As exciting as travelling and exploring might sound, it has a couple of its own downsides too. They occur most especially when you cannot plan and execute the entire process efficiently from the start. Be sure to let this article help you checkmate every aspect of your planning process and give a smooth travelling/loaning experience.

Individuals and businesses need money to cater for their needs. Sometimes they might have low cash flow to get things done. Small Medium Enterprise (SME) loans help businesses to expand their businesses. These loans help them keep operating with little to worry about financially. What SME loan means, how it works, how to qualify, etc. are all-inclusive in this article.

What you should know about SME loans in South Africa?

Small and Medium Enterprise (SME)loan in South Africa is the type of loan small and medium businesses can get to fund their enterprises. Besides that, the SME loan provides a single line of credit for meeting the borrowing needs of small and medium enterprises. Businesses can use such loans as working capital and for long-term requirements.

How do SME loans work?

You must know how a particular loan package works before you can apply. This knowledge helps the borrower (individuals or businesses) make financial decisions forehand. The following are how the SME loan works in South Africa:

• Apply for the SME loan

You can apply for the SME loan online, fill the form online, and follow the prompts. You can also visit your lender’s office and request for the loan. Then give them the basic details they need about you and your business.

Thereafter, their South Africa investment team will review the pre-evaluation form that you will submit. 

• Business check

The South Africa investment manager of your lender will probably assess your business. They will highlight key risks and opportunities to make your business ready for investment.

• They will approve your loan

After assessing your business, they suit your application to a committee for review. Once they approve it, they will offer you the loan, usually in a goal letter.

• Disbursal of funds

They will disburse the funds to your business once you formally accept their offer.

• They support your business

You will have continuous value-adding business support focusing on your business’s needs. They will support your business in order to enhance the success of your business while helping you implement your business plan.

• Last installment and help for your business growth

Their formal involvement with your business ends once you pay your last installment. After that, they can help you review your business plan. Also, they can help discuss any further finance and support you could need in keeping with your business growth needs.

See also: How to access bridging loans in South Africa.

How can my business qualify for any SME loan in South Africa?

Your business has to qualify for the SME loans before they can give you the loan. This is because the lenders have specific criteria that businesses must meet before they can get the loan.

The following are the usual criteria for SME loans qualification:

1. Your personal and business credit score must be good. A credit score of 650 and above would be good

2. Prepare and possess a financial statement and management accounts

3. Have a minimum of 2 to 3 years experience of running your business

Companies that lend money to businesses in South Africa

There are some companies that offer business loans to businesses. Not all financial institutions offer this type of loan. This could be because of the enormous amount of loan businesses can use to cater for their needs.

The following are the companies that lend business loans:

1. Fincheck

2. Lulalend

3. Finder

4. Merchant Capital

5. iKhoka

6. Zande Africa 

7. Bright on Capital

8. ProfitShare Partners 

Conclusion

The role that SME play in South Africa is very important to the economy. SME boast creating about 47% of the workforce in South Africa. Besides that, the National Development Plan (NDP) estimates that the country has to create about 11 million jobs by 2030. And for that to happen, 90% of these jobs would come from the SME. Millions of South African citizens have jobs in SMEs. The SME loan provides businesses with the financial backup to keep their operations going, especially when they do not have enough cash flow.

Getting a loan is a sure means of getting out of financial difficulties. But it comes with responsibilities and maximum carefulness. Repaying your loan is a tremendous responsibility you must pay great attention to. The difficulty of making timely repayments of debts has to encourage borrowers to consider a consolidation loan. Doing this, you will be on your way to a calm, healthy, and debt-free life. Debt consolidation will definitely liberate you from your debt woes and pave the way for your healthier financial future. How debt consolidation works, how to apply, debts you can consolidate, etc are all-inclusive in this article.

What is a consolidation loan?

They see consolidation loans as ‘Debt consolidation loans.’ Debt consolidation loan is the type of loan you take out to pay off several smaller loans. The significant thing about this type of loan is you owe only one creditor that is, the financial institution that gave you the debt consolidation loan. Besides that, the repayments are often at a lower interest rate over a manageable period.

Debt consolidation helps you to refinance in order to deal with overwhelming debt. This is because it allows you to combine all of your short-term debts. These debts come as credit card debt, store accounts, personal loans, and so on.

How does a debt consolidation loan work?

Just like every other form of loan, before you get a debt consolidation loan you must meet some criteria. First, the lending institution must ensure that you can repay the debt consolidation loan.  

Then, when they approve the loan, you will receive the loan in your bank account.

Some financial institutions may insist that you show them your settlement letters from your creditors. Here, the financial institution will settle your debts directly with your creditors.

Ensure that the lender gives you a repayment plan you can manage for your debt consolidation loan.

How to apply for a debt consolidation loan?

The South National African Credit Regulator (NCR) regulates loans in South Africa under the National Credit Act (NCA) 2005. Therefore, ensure you apply for the debt consolidation loan through a reputable financial institution that complies with the NCR standards.

You need the following to apply for a debt consolidation loan?

1. Have a good credit record
2. Earn a regular monthly income of at least R5,000
3. Be 18 years old or above
4. Present the details of your bank account into which you receive your salary
5. Get your last 3 months’ payslips or bank statements
6. A copy of your identity document
7. Get a recent document confirming your residential address

What are the financial institutions that offer consolidation loans in South Africa?

There are notable financial institutions that offer debt consolidation loans in South Africa. But before you make the final decision on your choice for a debt consolidation loan lender, consider the following.

The following are the notable financial institutions that offer consolidation loans in South Africa:

1. Blue Oak Systems
2. ConsoliDebt 
3. Paragon Lending Solutions
4. Debt Rescue 
5. Debt Busters

What types of debts can I consolidate?

There are debts you can consolidate with the debt consolidation loan. You will now have fewer payments to worry about. Debt consolidation loans will give you the relief to have some money you can invest.

The following are the debts you can consolidate:

1. Student loans: Having taken a student loan to cover your tuition fees and other costs. You can take a debt consolidation loan if you still have a student loan in your name

2. Personal loans: If you want to get out of debt quicker from your personal loan. Seeing that some personal loans have high-interest rates. You can get a consolidation loan so you’ll save money on the interest rate. This is because the debt consolidation loan interest rate is lower than a personal loan.

3. Credit cards: Debt consolidation loan can help build you a solid plan to get rid of credit card debt once and for all

Is my credit score at risk if I get a debt consolidation?

Your credit score is one of your details lenders look at before they give you a loan. Your credit score testifies your financial behaviour to the lenders. Well, Debt consolidation loan benefits your credit score because you will probably have less chance to miss payments. You’ll only have to make payments only to one lender and not to different lenders or accounts. It will also help you tackle your debts faster.

What are some benefits of debt consolidation?

1. It will help you make only one payment, service fee and credit protection plan.

2. Its personal protection plan will settle your outstanding loan balance against unforeseen circumstances like death, sickness, disability, etc.

3. The monthly repayment of the qualifying credit will be lower than what you’re currently paying.

4. You will have more money to invest.

What are the high risks of debt consolidation?

Although the benefits of debt consolidation loans are alluring, you also need to consider the flip side of it. The following are the cons of debt consolidation loans:

1. It does not remove chances of debt

Debt consolidation can’t guarantee that you won’t accumulate more debt in the future. You might start living over your means once you are debt-free if you have a history of doing so. Create a reasonable budget for yourself and follow it to help prevent this. Starting an emergency fund that can be used to cover unforeseen expenses will help you avoid having to utilise credit cards.

2. Upfront costs may be inclusive

Ask about any fees upfront, such as those for making late or early loan repayments, before taking out a debt consolidation loan. These fees could cost hundreds or even thousands of Cedis, depending on your lender. You should consider these costs when determining whether debt consolidation is a good option for you, even though paying them might still be worthwhile.

3. Setback caused by missed payments

You’ll probably have to pay a late payment fee if you forget to make one of your monthly loan payments. Additionally, some lenders will charge you a returned payment fee if a payment is returned owing to insufficient money. Your borrowing costs may be significantly increased by these surcharges.

Additionally, since lenders often notify credit bureaus of a late payment when it is 30 days past due, your credit score may be seriously harmed. You may find it more difficult to qualify for loans in the future and to get the best interest rate as a result. If the lender offers an automated payment plan, sign up for it to lessen your chances of missing a payment.

Conclusion

With a debt consolidation loan, reduce the size of the money you spend on loan repayments. This is because the goal of a debt consolidation loan is to reduce your monthly debt payment. Besides that, this type of loan aims to ease your financial burden by giving you extra cash at month end. However, ensure you can repay the debt consolidation loan before you get it from any reputable financial institution.

Because of the lack of jobs and economic downtime, the need for disposable income keeps increasing. Understandably, we encounter unending needs and to this effect, we must use money to solve these needs. Loans for non-salary earners offer cash flow to the unemployed and self-employed people in South Africa. What loans for non-salary earners are, how to apply for those loans, etc are all-inclusive in this article.

What are loans for non-salary earners?

In order to know what loans for salary earners are, understand who a non-salary earner is. A non salary earner is someone who earns a fixed regular payment made by an employer. The employer usually makes this payment monthly, for professional or office work, unlike manual work.

From the explanation of what non salary earner means. You can see that the unemployed and self-employed people fall under the category for non salary earners.

These non salary earner loans can be; student loans, payday loans, but usually personal loans. The aim is to provide money for people who do not have employers who pay their salaries.

What is an unemployed loan?

The unemployed loan is the type of loan that people with an unstable job or source of income can get. The credit terms, interest rates and some other features usually differ from what employed people get. They also consider the unemployed loan as a loan for non-salary earners. However, you can get a non-salary earner loan from financial institutions in South Africa.

How to get an unemployed loan?

Having understood the meaning of loans for non-salary earners and the people who fall under its category. How you can get the loan should ring in your mind at the moment. You can get the unemployed loan under special terms and conditions. 

Most times financial institutions will offer you a loan as a non-salary earner if you provide a collateral.

How can I apply for a personal loan for non-salary earners?

The method of application for loans differs across financial institutions. Besides that, applications for the loans for non-salary earners (both unemployed and self-employed) differ across financial institutions.

The following are the ways you can apply for the non-salary earners loans:

1. Visit the financial institution that offers loans for non-salary earners and request the loan. Submit the documents they require getting your loan.

2. You can make your application online. By visiting their website with your smartphone, tablet or personal computer. Provide your personal information and follow the prompts to get the loan.

3. You can reach the customer executive of the financial institution over the phone. Make your request for the loan known to them. They’ll guide you on how you will secure the loan.

What are the loans for non-salary earners (unemployed)?

There are types of loans for the   earners (unemployed). But before you get the loan, provide a collateral. This is because you don’t earn salaries and because of that the financial institution doesn’t have your bank statement of account. This makes them see lending you money as a tremendous risk.

The following are the loans for non-salary earners (unemployed):

1. Property loan

You can get a loan against your property if you need money. This is a means to secure your loan because you don’t earn salaries. If you can’t provide security (collateral) for the loan, your lender might not give you a loan. It’s a risk to give a non-salary earner, therefore collaterals will help secure you the loan. Because of the tremendous loan size that usually comes with the property loan. You can consider starting up a business and earn a regular income. 

2. Secured personal loan

Secure personal loan helps you to make big purchases or consolidate high interest debts. You can only get this loan by providing security (collateral) for it. Because of the collateral, you’ll have a lower interest rate to the loan

3. Loan under government scheme

Some government loan schemes offer loans to youths. These kinds of schemes provide self-employment opportunities for the youths.

What can I look out for in getting a personal loan from different banks as a self-employed?

In getting a personal loan, there are details you need to consider. Even as a self-employed individual, you must make the right decision.

The following are the things to look out for in getting a personal loan as a self-employed:

1. Always compare the interest rate the different banks offer and choose the one you prefer

2. Keep in mind the Equated Monthly Installment (EMI)of different banks. Compare and contrast the monthly EMI of different banks for the same loan amount

3. Consider how fast they disburse payments

4. Know the bank that offers the lowest processing fee.

5. There are some banks that include prepayment charges

6. Make your choice regarding the loan tenure they offer. Choose the one that suits you best

Will my credit score play a role in getting a loan for non salary earners?

A good credit score ensures you have a better chance of getting a loan for non salary earners. A health credit score increases your chances of getting any form of credit. It encourages the lender by showing your pleasant habit of repaying debts, even if you’re not a salary earner.

Conclusion

The loans for non salary earners is a sure way to include non salary earners financially. They can now start-up businesses and make investments. Besides that, they now have the same opportunity of cash flow just like their salary earners counterparts. This gives them a sense of belonging in the South African society. However, they must ensure they repay their loans to have the same opportunity in the future.

To get a home loan, you must meet the minimum credit score. Fortunately, if you have a good credit score, you will have a better chance of getting a home loan approval. The home you always want to have for one reason or the other could really become yours. And you must not forget that priceless grand feeling you have when you finally actualise your goal. Minimum credit score, who calculates it, what you can do to know it are all-inclusive in this article.

What is a credit score?

A credit score is the numerical expression that describes a person’s credit files. Besides that, it represents the creditworthiness of an individual. The credit score of individuals primarily comes from a credit report. And they get this information from credit bureaus.

What is the minimum credit score I can have to secure a home loan in South Africa?

In South Africa, a credit score of 600 and above will give you a fair chance of home loan approval. This might not be the same credit score that other banks would accept. However, they see a score of 670 and above as an excellent credit score. It will definitely boost your chances of getting a home loan approval. Obviously, they consider credit scores below 600 as an enormous risk for the banks.

Is it possible to get a home loan with bad credit in South Africa?

Sometimes, many individuals might not know that they have a bad credit score. Possibly, this could happen because of an error from the credit bureaus. In this situation of having a bad credit score, you can get a home loan. Especially if you request a correction on your credit report from the credit bureau.

 You can get a home loan depending on how bad your credit rating is. However, they will reject your home loan application if they blacklist you with the credit bureau.

Across all financial institutions, the higher your credit score, the better for you to get a home loan.

Who calculates my credit score?

For whatever reason you need a loan, it’s nice to know who calculates your credit score. The credit bureaus calculate your credit score based on your financial behaviour, which could be positive or negative. The early payments you make, as your repayment term says, reflect on your credit score. Loan providers consider your credit score before they give you a loan.

What credit score do I need to get a home loan in South Africa?

For a home loan in South Africa, you must possess a good credit score. Your credit score should be 640 and above if you want to increase your chances of getting a home loan.

General credit score in South Africa?

You can avoid a negative credit score when you know what makes up a credit score. In South Africa, a credit score ranges from 300 to 850. This range of credit scores shows your credit rating. And it depends on the positive or negative information they get in your credit report. When your credit score is between 300 and 579, they consider it to be bad. Whereas, they consider it to be good when your credit score is above 700. They also consider your credit score to be fair when it’s between 580 and 669.

What is a credit report?

Credit report is almost the first thing any bank will get when they receive your loan application. They get the credit report on your credit profile from the credit bureaux (TransUnion, Experian, etc.). Because of this, it makes sense for you to request a report of your credit score as soon as possible.

In South Africa, the National Credit Act entitles everyone to one free credit report yearly. However, you can get more regular reports for a price near R80.00 per report.

What is the information in my credit report?

Your credit score reveals all your financial behaviour, which could either be good or bad.

The following is the information your credit score bears:

1. The amount of money you owe
2. Your payment history
3. The activity on your bank account
4. How long you have used your accounts
5. The number of credit check on you

What can I do to know my credit score?

It is very important to know your credit score from time to time. This is because the credit score changes because of various financial transactions you make. Besides that, there might be errors while bureaus work on your credit score. In South Africa, everyone has the right to one free credit report from any credit bureau yearly. You can also get your account status, credit score, and summary for a small fee.

Conclusion

Lenders won’t like to take a risk by giving you a home loan when you have a bad credit score. Therefore, with the knowledge of the minimum credit score for home loans in South Africa. You can now try as much as possible to measure up with the minimum credit score. Making payments conformably and avoiding debts will go a long way in adding good scores to your rating.

Getting your loan application declined isn’t a pleasant feeling at all. Especially when you’re in dire need of a proposed amount. We can prevent this unfortunate situation from ever happening or repeating itself. Before applying for a loan, it is important to keep some things at the back of your mind to help you through the process. 

This article is towards guiding you through the few reasons your financial provider may reject your loan application.

Here are the 5 reasons the financial credit provider of your choice may reject your loan:

1. A botched application

This is the most basic, yet the most common mistakes made by loan applicants. This mistake happens when the loan applicants fail to handle the application properly.

Leaving sections of the application unfinished, entering incorrect information, or failing to include the required documentation contributes to this mistake. It is also important to take out time to read on how to write a proper loan application before applying.

2. Incorrect information on your credit report

Credit reporting errors are one of the most common occurrences. This can affect your credit score and in turn your ability to get a loan. Some other errors can include out-of-date personal information or having multiple debts more than once creating a duplicate.

Incorrect record of the number of credit enquiries listed on your file and adverse notices can also affect your overall credit rating. Lenders usually send adverse notice, letting you know the reason they declined the application. The accuracy of the information in your credit file is important. Knowing this, getting a copy of your credit report and amending it right away will be highly advisable.

3. Your business/enterprise is too green

Yes, every business needs to start somewhere and there is suppose to be no shame in being a young company. It’s actually something to be proud of because it takes determination to turn your idea into a reality.

The fact that a business ability to repay a debt is substantially impacted by the amount of money it brings in. Most lenders are understandably skittish when dealing with businesses that lack a track record. 

4. Large amount of debt

Although a personal loan can help in consolidating your debt, your credit provider might decline your application if you are owing too much already. Lenders usually look at the percentage of your income that goes to settle your other loans. They then compare it when processing your loan application 

The above technique is your debt-to-income ratio. Knowing all these, be sure to pay off all outstanding loans before applying for another as it affects your application.

5. Instability in employment and irregular income

For most people, the major source of income will be from employment. For financial confidence, lenders need to see that you are in a stable financial position. Your loan application may be declined if you’ve been changing your job every few months and unable to prove regular income. 

Conclusion

If your application is denied, don’t despair. Remember, most loans are met with a hard no. Take positives from the experience by learning from your errors and submitting an even stronger application the next time around. This approach ensures progress. Keep it up and you’ll eventually get the finance you or your business requires.

We expect the demand for home loans in South Africa to increase due to the economic conditions of the country. In addition, we also expect the number of homeowners who are selling under economic pressure to rise consequently. As a result, taking a home loan can be a wise decision considering the latest trend around commercial homeowners in South Africa.

A home loan could be what you need at the moment. But you might not know what to do to qualify for a home loan. There are requirements that a South African must meet to qualify for a home loan. What home loan is, the requirements, how much you need to earn, etc are all-inclusive in this article.

What is a home loan?

A home loan is the amount of money you borrow from any financial institution to buy a house. Home loans comprise adjustable or fixed interest rate and repayment terms.

What you must meet to qualify for a home loan in South Africa

There are some demands you must meet for lenders to give you a loan. This helps them know if you are trustworthy to repay the loan.

You must meet the following to qualify for a home loan in South Africa:

1. Have an excellent credit history
2. Be 18 years old and above
3. Have a permanent employment for 6 consecutive months
4. Self-employment not less than 2 years

What are the requirements for a home loan in South Africa?

When you meet with the above demands, lenders would want additional documentation from you. These documents will give the lenders additional information about you.

The following are the requirements for a home loan in South Africa:

For salary earners:

1. Provide the last three months’ bank statements for your personal account. Also provide that of your partner, if applicable
2. Show the statement of your monthly income and expenses.
3. You must provide your latest salary slip. Some lenders could ask for your last three salary advice if you earn commission. 
4. Show them a copy of your South African ID document
5. Show your personal assets and liabilities statement.
6. Get a copy of the purchase agreement

For the self-employed:

1. Provide a letter of drawings. You can get this from your accountant. You must provide this because you do not earn salaries and can’t provide a salary slip.
2. Submit your personal assets and liabilities statement
3. Provide your business account bank statements (last 6 months)
4. Show them your last two years’ annual financial statements (AFS)
5. Provide the copies of your ID document
6. Get a copy of the purchase agreement

How much do I need to earn monthly to buy a home in South Africa?

You would need heavy financing in order to buy a home on a single income. For that to happen, you need to earn a minimum of R15,000 per month after tax. Because of this, the lenders can offer you a home loan of around R500,000.

What are the pros of and cons of a home loan?

Before getting any form of loan, you ensure that there are benefits you can gain. However, there are also some cons that come with home loans.

The following are the pros and cons of a home loan:

The pros are:

1. The interest rate of a home loan is lower than that of a personal loan
2. Individuals can now purchase the homes of their own with a home loan
3. The lender ensures the safety of the home you bought

The cons are:

1. The repayment requires an enormous commitment for a long period
2. It is risky, unforeseen circumstances can come along the way and hamper the repayment of the loans
3. Continuous repayments of loans and interest rates can stop you from investing your money

Conclusion

Buying a house requires an enormous amount of money. Whether you are a salary earner, you could find it too difficult to buy a house. Because of this, consider a home loan for you to buy the house you dream of. There are various financial institutions in South Africa that can offer you a home loan. However, keep in mind the content of this article if you wish to apply for a home loan.