If you’re struggling to get a loan in South Africa, you’re not alone.
Capitec recently tightened its lending criteria for personal loans. This follows African Bank’s introduction of stricter eligibility requirements for loans at the end of last year.
Other South African banks are also looking to minimise their risk and continue to apply tight restrictions on lending.
In this context, loans against personal assets – like those we offer at LoanAgainst – are a consumer-friendly and flexible alternative for securing funds.
Personal loans as a necessary lifeline for South Africans
South Africans are increasingly turning to credit to keep afloat.
A series of aggressive interest rate hikes, coupled with soaring food, electricity and petrol prices, has left top income earners with the highest debt to income ratios ever recorded.
According to the Debt Index, average salaries have only increased by a nominal 1% over the past seven years. Cumulative inflation has risen by 41%, leaving consumers with a 40% decline in purchasing power.
The bulk of consumers are left with no choice but to borrow money to cover monthly expenses. As reported in the Sowetan, unsecured debt is 26% higher than it was in 2016. The average loan amount is a staggering 78% higher.
What to consider if you are struggling to get a loan
Not everyone is in a position to secure credit from traditional finance providers, like banks, or alternative lenders such as ourselves.
Here are a few important factors to consider before signing a loan agreement.
Is a loan the best option?
If you’re taking on more debt to supplement your income, think again. Personal loans are only useful for addressing short-term needs.
Applying for a loan is only a good idea if you’re expecting an injection of income in the immediate future, and are comfortable you can repay the loan.
Potential for improving your credit score
Your credit score plays a major role in the traditional loan approval process. It’s an indication of the risk involved in lending you money. If your credit record is poor, you won’t get a loan through a bank.
You can improve your financial record by paying your bills on time and paying off debt. Alternatively, you can use an asset to secure a loan through LoanAgainst. This way, your credit score is irrelevant.
The right amount to borrow
The amount you borrow should be the minimum sum required to bridge a gap or exploit an opportunity.
It’s tempting to get a loan for a higher amount than you need. However, this is not a wise financial move because there’s a cost to any loan. The more money you borrow, the higher the cost.
An alternative: using an asset to get a loan
At LoanAgainst, we provide short-term loans secured by personal assets, such as vehicles, luxury watches, jewellery, artworks, antiques and boats.
The amount we lend is based solely on the appraised value of the asset, which is handed over to us and securely locked away.
The asset is returned once the amount you have borrowed, together with the interest accrued, is repaid according to the terms of the loan agreement.
We offer a convenient online application process, easy loan approvals and quick access to funds – regardless of your debt status or credit score.
If you’re struggling to get a loan, contact LoanAgainst to get a fast asset-based loan.
