Low credit score loans are specifically designed for South Africans with poor credit histories, but they tend to be more expensive than traditional personal loans. It is possible to get a loan even if you have been blacklisted, as long as you can prove to the lender that you can afford the repayments or that you have some form of collateral available.
We have expert advice and tips you can use to improve your chances of getting a loan.
What does it mean to have a low credit score?
When you have a low credit score, it simply means that the financial organization thinks you are a potential risk to the service they provide. We also know people with a low credit score as ‘blacklisted’. It is important to note that the term blacklisted can be a misleading choice of words, as there is no so-called official ‘blacklist’. In South Africa, they label people as blacklisted because of failure to consolidate and repay their debts and bills.
How do you know you have a low credit score?
When it comes to bad credit history, you must have a clear understanding of what is recorded against you. To do this, we recommend you request your credit report and carefully review it. Currently, everyone is entitled to a free and full credit report once every year from a credit provider in South Africa.
Apart from that, some companies will provide you with your account status, credit score, and a credit summary for a small fee. Let it be known that no company will ever tell you that you’ve been blacklisted. As such, a list simply does not exist. If you notice any errors, you should address these immediately. It is not uncommon for people to find that there are fraudulent items on their credit reports.
What is a bad credit score
A credit score can be seen as a number ranging from 300-850. This number shows how good your credit rating is. It depends on positive or negative information found in your credit report. This information includes the following:
- amount of money that you owe;
- payment history;
- activity on a bank account;
- the age of your accounts; and
- credit checks that have been carried out on you
Additionally, your credit score simply shows all your good and bad financial behavior.
How does having bad credit affect you
Being on a blacklist can stop you from getting a loan to buy valuable assets like motor vehicles, property or even starting up a business. Yet, being blacklisted is nothing to be ashamed of. A great number of professionals have found themselves on a credit blacklist at one point or another. South Africans who are blacklisted can apply for loans to ease their financial concerns.
It is important to know that bad credit does not mean you can’t get a personal loan. Although you may not qualify for the products offered by traditional banks, you might qualify for those offered by other bad credit lenders. For this reason, you should always consider all of your options.
It’s just a matter of being careful about it. You should apply for a loan with different lenders within a short period such as a week or two. In this way, the applications will not have a negative impact on your credit record. In order to apply for credit, you must apply only to credit providers registered under the National Credit Act.
It is important to understand that loan sharks will offer you a personal loan for bad credit, but they will charge you high-interest rates and fees that you may not be able to afford. If your credit record is poor, you should consider bad credit and blacklisted lenders as alternatives to traditional lenders.
Am I going to be blacklisted forever?
The answer to this question depends on whether you are taking the necessary steps to repair your credit history or not. This is what determines how long you will stay blacklisted
How do low credit score loans work?
Lenders specializing in low credit score loans work on a golden rule. A Lender grants this loan on the premises that if there’s a default on any of the payment terms, the value of the assets you have pledged as collateral covers them. They may legally confiscate and sell the valuables to cover the cost of the outstanding loan plus interest.
Which type of loans can I get with a low credit score?
As stated earlier, being blacklisted doesn’t mean you have been totally condemned. There are still a few credit services you can enjoy. Some of these credit services include;
1. Payday loans
Some private lenders offer short-term microloans for blacklisted people. This is a form of unsecured personal loan, but they often come with difficult conditions and higher interest rates. It becomes quite difficult to borrow a large amount because paying back the interest plus the loan amount can become too exorbitant.
2. Secured loans
These types of loans are the easiest to obtain by blacklisted people. With this type of credit, the borrower has to provide an asset that belongs to them as collateral or security. This is so in a situation of default or breach in payback terms, the lender reserves the right to claim the asset.
You can get this loan against your car, landed property or more. However, it is important to note that you risk losing your property if you don’t pay back the loan amount.
Financial providers that grant loans to the blacklisted
Here is a quick list of companies that offer loans to people with bad credit.
- Atara365 Loans
ATARA finance is one of the best credit providers that offer bad credit loans. They offer easy and convenient ways to apply for bad credit loans online. With a high approval rate and minimum info required, ATARA offers a minimum loan of R1000.00 and a maximum of R300 000.00. So, are you struggling to get a loan with bad credit, stress no more as ATARA loan’s got everything you need and more
- Lime loans
Lime loans operate with a team of highly trained personnel and a combination of machine and technology. They’ve built the platform uniquely to serve their clients, even clients with bad credit.
- Ezi finance
Are you in urgent need of finance but have a bad credit score? Ezi Finance can hook you up with a credible lending institution. Ezi finance acts as an intermediary between borrowers and credit institutions. With Ezi Finance, you don’t have to be running around sourcing for the best loans for your needs.
Other financial providers that offer bad credit loans include;
- Nexcare Finance
Before actually applying for any of these loans, be sure to do your personal check on the terms and conditions of each of the companies. It’s wise to weigh all the options and choose the best of them.
Alternative ways to get a Loan if you have Bad Credit
An unsecured loan from a family member or friend is definitely more comfortable for you. If you are blacklisted, you will have a better chance of getting finance as well. If you choose this option, you must ensure that all the details are spelled out in a contract to avoid disagreements and problems later and ideally have the funds transferred to your bank account instead of receiving cash.
Friends and family will be the cheapest and safe option if you need a small payday loan or just a little bit of money to tide you over until payday. You may still be able to get some assistance from your family and friends even if they are not able to lend you money directly. If As long as they have a stable and secure employment income, they can be your co-signers.
If you have a co-signer, you both take out the loan jointly and are responsible for its repayment. By doing so, the lender’s risk is reduced, and you can get a pretty good deal.
If you find yourself in a financially tight corner and in dire need of credit service but you are on the “blacklist”, do not give up hope. There’s a score of financial service providers out there that are willing to provide you with the finance you need.