As a result of our weak currency, high inflation, low wages, and wide-spread unemployment, more and more South Africans are taking out loans to subsidise their incomes.
An alarming 45 percent of these consumers fall behind on their repayments, and many get stuck in a cycle of poverty and bad debt. Statistics show that millions of South Africans – more than ever before – now have impaired credit records.
Most South Africans are drowning in debt
Data collected by Debt Rescue, a debt management firm, shows that 77 percent of South Africans are flat broke come month end, with more and more of us taking out loans to survive. In fact, the World Bank ranked South Africa as the country where people are most in need of loans – with a staggering 86 percent of South African adults taking out some form of loan in 2013/2014.
The NCR reports that of the 23.11 million consumer credit records held by credit bureaus in South Africa, 10.4 million of the records are impaired, and close to 50 percent of our 19 million active consumers are three months plus in arrears.
Data collected by Debt Rescue also shows that many South Africans owe up to 75 percent of their salaries to creditors, with 58 percent of those surveyed struggling to pay off their credit card debts, and 56 percent struggling to pay off their home loans.
With combined consumer debt totalling almost $118 billion – larger than the total gross domestic product of some countries – more South Africans are blacklisted than ever before.
Implications of a poor credit rating
The main implication of a poor credit rating is that you’ll likely find it difficult to secure a traditional bank loan or other forms of credit, such as credit for paying off a car or home.
Also, rectifying your credit rating takes time. This applies especially if legal action has ever been taken against you for not settling your debt in the past.
How to get a loan if you have a bad credit rating
If you have a poor credit rating but need a short-term loan to overcome a cash flow problem, one option is to apply for an asset-based loan with Lamna.
An asset-based loan requires that you provide an asset as surety – for example, a car in your name, jewellery or something else of value. The loan amount is determined by the monetary value of the asset you put up as collateral.
Because the asset serves as collateral, the lender has no interest in your credit rating or other personal, financial information. Once you’ve repaid the loan with the agreed interest, your asset will be returned to you in the same condition you left it in.
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.