People have all kinds of reasons for getting loans. For example, you might want to fund a business, cover a short-term cash-flow issue, pay unexpected medical bills or refinance your existing debt at a more favourable interest rate.
Some loans are easier to get than others. Whichever type of loan you get, you’ll be expected to pay the money back at a predetermined rate of interest, and within a defined period.
We consider the different types of loans available in South Africa, what you typically need to qualify for these loans and what you can do to improve your chances of getting a loan.
Secured bank loans
Banks traditionally offer loans – including home, study and vehicle loans – at comparatively low interest rates. They also offer large loans. But to protect themselves, banks have very strict qualifying criteria.
These include proof of income, a clean credit record, a high credit score and, in the case of a secured loan, a title deed or asset as security.
Even if you meet basic criteria, a bank may fail to approve your loan application, or approve only a smaller loan than you hoped to obtain.
Unsecured personal bank loans
If you’re borrowing cash for personal use and it’s not secured by an asset, your credit score is the key determining factor. A high credit score, clean credit record and stable monthly income improve your chances of qualifying for an unsecured personal bank loan, or credit card.
If you don’t have a fixed source of income and/or your credit rating is low, it’s unlikely you’ll qualify for a personal bank loan.
If your company is experiencing cash flow problems but has a good track record of generating profits over a long term, you’re likely to qualify for a business loan with a reasonable interest rate. Some form of collateral, or surety, is also typically required.
Brand new start-ups, or companies that are struggling to stay afloat, are not so lucky. They’ll find it difficult to qualify for traditional bank loans.
Short-term asset-based personal and business loans
Short-term asset-based loans are faster and easier to get than bank loans, but typically have higher interest rates.
You supply an asset of value, which is held as collateral against the amount that’s loaned. This makes it unnecessary for the lender to make “guesstimates” about the risk involved in granting the loan – there’s no need for credit scores or analysis of your financial history and status because the asset secures the loan.
Once you’ve paid back the loan with the agreed interest, the asset is returned to you.
For this type of loan, the only qualifying criterion is a fully owned asset of value.
How to improve your chances of getting a loan
Before you apply for a loan at the bank, request a free credit report to assess your credit history and rating. If your rating isn’t great, there are steps you can take to improve your credit score. If you don’t have a credit history, or the banks and other traditional financial institutions are determined to turn down your application, a secured personal loan is a viable solution.
To facilitate the process of getting an asset-based loan, just provide the lender with as much information as you can about the asset you’re offering as security.
Getting a loan from Lamna
At Lamna, we offer fast, discreet loans against the value of a wide range of assets, from luxury watches and jewellery to vehicles or artwork.
Client borrows R10,000 for 90 days.
Total Cost of Loan
Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.