Useful Information

How to Get Loans if you’re blacklisted with Bad Credit

The credit situation in South Africa is going through a difficult time as over 80% of the population can’t even afford to apply for one. Most people don’t own their own land and this cuts the way to a good credit because they don’t have anything to offer as collaterals.

According to a recent study, over 90% of the wealth of South Africa is owned by 10% of the population (most of them white), leaving the indigenous black population in poverty and without any chance to a better life.

debt inequality

This situation has deep roots and it’s a direct result of the South African politics in the latest decades. Most of the black population leaves at the outskirts of cities, in poorly constructed structures, without access to modern day’s comforts, sanitation, or even education.

To top things off, the ones who manage to get a good education, don’t have the necessary funds to start a business and don’t have access to good funding resources. So, you can see why there aren’t that many local businesses, built by locals and addressed towards the black population.

Besides the lack of collaterals, South Africans also run the risk of being blacklisted with bad credit if they miss their payments. Considering the situation, you can only imagine that this is a common occurrence. So, we put together a guide to help two types of people: South Africans who want to get out of debt and launch their own business and people who want to understand the local business environment.

Avoiding Debt In The First Place

Someone wise once said that prevention is the best treatment, and you can see why this applies to one’s financial situation just as well. If you have the possibility to avoid getting in debt, then this is the way for you, regardless how difficult!

avoidingdebt

Below I listed some resources you can use in order to avoid collaboration with a credit institution.

Your own Savings

Many people tend to keep their savings apart from their business to have something to land in the case the dream is shattered. This can be seen as safe behavior, but it can be the very reason why the dream falls.

If you go to a credit institution and ask for a loan instead of using your savings, you risk the possibility that you end up in debt because you couldn’t pay your monthly rate. Since the loan you took was for starting the business, you’ll probably be still in the development phase which is not known for profits. This means that you won’t be actually producing an income to keep you and the business alive. And by now, the savings will probably be used to get out of debt.

However, if you do use your savings to start the business and you run out of money, you already know if the business is viable. You should also have a well-designed business plan and something to show for when you apply for a credit.

And yes, you may still end up in collaboration with a credit institution, but you are moving towards a more profitable phase in the business and the chances of you ending up in debt are lower.

Investors

Another way to stay out of debt and still get a business running is by finding people interested in investing in your dream. Still, this requires a working concept or at least a very well-designed business plan that will convince interested parties of their own profit in the collaboration.

Finding investors is a delicate task and requires lots of networking and lobbying, but there are also online platforms and specific institutions that can help you get to people a lot easier. These work as an intermediary between people who are looking for their next great idea to invest and people who have great ideas but lack funding.

Crowdfunding

Crowdfunding is a fantastic way to launch a new business, but it may be inaccessible to people who come from the lower circles of society in South Africa. However, if you have access to such a platform and you have the possibility to put together a killer campaign, there is a great chance that you’ll get the funds you need and more.

Picture courtesy of Pakwired.

Crowdfunding is the go-to resource when you can’t get a loan from a bank or you can’t find an angel investor. It’s also very easy to find a platform that will help build your dream as there are several dedicated sites in the online world (you can read about the most popular platforms here).

These are just a few ways to make sure you won’t end up in debt and on a blacklist just because you had the dream of starting your own business. With a bit of creativity and great ideas, you may find more ways so don’t give up, keep looking.

How to get un-blacklisted

First, it’s important to make sure you are blacklisted as some scammers just want to scare you into paying more. For this, you just have to do a credit check. South Africa’s credit bureau is obliged to give every citizen one free credit check per year so you should take advantage of this opportunity.

Sadly, it seems that not that many people know about this possibility as only 3% of the 25+million people who have a credit will do this check. Most wait until the last minute and discover that they are blacklisted when it’s a bit too late (when a loan application is refused because of this reason).

To make things simpler and increase the level of access to the credit check option, the largest credit bureau in South Africa allows users to get information on their credit worthiness via SMS. Even more, you don’t need to own a smartphone to be able to read the information. This plays well with the level of technology penetration in South African countries here only 37% of people own and use smartphones.

Finally, if you are not interested in learning about your financial health, and you don’t want to apply for a loan, it’s important to do this check anyways. Credits may have been applied in your name by scammers and now you could be on several blacklists. This is something that will affect your serenity at a certain moment in life so you must be careful.

What to do if you are blacklisted?

First, it’s important to understand what being blacklisted actually means as for many people, this word is extremely scary. So, if you are blacklisted, it just means that your credit profile has some negative information posted there by one of the major credit bureaus: Transunion Credit Bureau or Experian Credit Bureau.

While it may not seem like a big deal now that you know what it is, being blacklisted will still be a hindrance on your day-to-day life as it will prevent you from getting any loans from financial institutions. This means that, if you are ready to apply for a house loan and you’re blacklisted, it will be a lot more difficult to get a positive reply.

Moving on, the most common blacklisting info that can be on your credit profile are (listed in the order of their importance):

  • Default listings
  • Judgments
  • Trace alerts
  • Administration
  • Sequestration

But there’s no need to worry too much (just yet). If you are on someone’s financial blacklist, there are some actions you can take to reinstate your credit worthiness. First, if credits have been applied in your name, without your knowledge, talk to the authorities. This is a felony and you shouldn’t be the one to suffer the consequences.

Now, if you are blacklisted because of your poor payment history or anything else you did, this is something that will shine a negative light on your profile as a future creditor. So, even if you have debt, you must make sure to improve your profile.

For instance, if you have any judgments on your credit profile, try to settle them. According to the Credit Act Amendments, if the judgment was settled the credit bureau must remove the listings.  

Besides judgments, default listings are just as heavy on your credit score. So, if you have any, try to get them removed (at least temporarily). It’s best if you can bring the accounts up to date or if you can settle them, but if this is not a possibility, you still have the chance of negotiating with the credit provider for a temporary removal (usually about 12 months).

Still, the best way to get un-blacklisted is to pay all your debt and work on clearing your credit score. You should know that this won’t happen overnight and it will be a while until you’ll be able to apply for new loans, but there are ways to improve.

How to improve your credit score

Your credit profile is nothing more but your history as a creditor and it is mostly based on your payment history. So, even if you’re in debt but you have a great payment history, you can still be eligible for one more loan.

Improve Credit Score

But, if you’re working on improving your score after you’ve been blacklisted, it’s important to know how long this information will be on your profile:

  • Payment history can go back to two years
  • Adverse listings varies from 2 to 5 years
  • A judgment will stay with your credit info for 5 years

Now, to improve your score, you should get in touch with all the credit providers and bureaus and ask for a confirmation settlement. Also, try to get in touch with the lawyers that covered the judgments on your profile and notify them that you have settled the account while asking them to rescind the judgment.

You should also check the Notifications section when you perform a credit check. If you find any ‘slow payer’ notes or default listings, try to get them removed by contacting the credit provider. Mention that you covered your debt and that the account has been settled. Still, you have to be prepared for a negative reply with these – credit providers have no obligation to remove these noted fast than specified by the law.

How to Clear your Payment History

Sadly, there’s not much you can do here as this is kept for two years. However, if you want to continue the good work and hope for the best, you can start fixing the issue with a small credit (one you know for sure you can afford). This is important for your Payment History because it will add credibility to your account. It also helps to make advanced payments and settle the account before its due date.

The other way to boost your credit score is to wait it out. As the time goes by, your payment history sheds the bad months and improves with new periods when your payment score is perfect. In about 6 to 8 months, your credit score will be perfect.

Finally, you may get lucky and get some governmental help like it happened with the Credit Amnesty (from 1 May 2014 to 31 June 2014). During this initiative, all records that followed a specific pattern were cleaned and people didn’t have to wait for their credit score to be boosted.

How to get a safe loan

Growing Your Investment

In a country where corruption is still in power and only companies that work with the government manage to make some profit, it’s difficult to consider getting a loan. Still, if you do, you must make sure you get one that is safe and won’t cause any problems along the way.

For this, you need to follow a few simple and clear rules when you choose the institution. We listed the most important ones below so, if you want to know how to get a safe loan, take a look.

If it’s too good to be true it probably is

In a society where poverty reaches alarming rates, there is lots of room for scammers who try to make a buck at the expense of people who don’t have a financial education. While we agree this is a very low way of making money, there are people and companies that use these practices with success so you have to be wary of the signs.

For instance, if a credit company mentions they accept blacklisted people or that they won’t be doing any credit check, then something is wrong. No legit company that knows how the world of finances works will accept these conditions! If you get such an offer, you should run as far away as possible as this company is operating illegally.

A legal company in this niche must be registered with the National Credit Regulator so you can run their credit. If they are not registered, they won’t follow the rules put in place to protect you from huge interest or fee scam.

Don’t trust just anyone

When you apply for a loan, it’s best to choose institutions you know. For instance, if you’ve been working with a bank for various transactions, this can also be the one to grant you a loan for your business. If you don’t qualify, you can ask family and friends for recommendations but you should always do your own research.

Don’t apply for online credits

Many South African people were the victims of an online scam, where they agreed to register for an online loan that promised far better conditions than any bank. This goes hand in hand with the first condition: if it’s too good to be true, it probably is.

However, people trusted the email they got because the fraudster used the logo and name of a legitimate bank. The email looked professional so people didn’t see why they should be wary of anything.

The best way to check if a loan offer is legit is by checking the National Credit Regulator registration (NCRCP) number. This has to show up in the email and if it doesn’t, it’s most definitely a fraud attempt. Still, if you find a number, go to the Regulator’s website (www.ncr.org.za), find the name and number of the institution that presumably sent you the email and call to check for the validity of the offer.

Read the Offers Carefully

Another scam that’s quite successful in South African countries is the case when someone thinks they apply for a loan, but they are actually registering to a service that has a monthly paid subscription. These are phone companies that send offers that sound confusing, making people believe they apply for a very advantageous loan.

In fact, you are subscribed to a telephonic service and, if you refuse payment, you’ll start getting threatening letters. Sadly, the practice works and there are no clear rules to how to stop these scammers.

Another way to fool people who are desperately looking for a loan because banks won’t grant them one is to use company names that contain the word ‘loan’ (for instance ‘Loan Hub’ or ‘Loan Scout’). These are only offering advice on how to get a loan, but they’ll charge you for this service every month. And, just like the scam phone companies, if you refuse to pay, you’ll get threatening letters and emails.

Overall, in order to get a safe loan outside a bank institution, it’s very important to be careful with the conditions. Even more, you must check if the institutions that come with tempting offers are legal and of good faith.

How to manage your repayments and future finances

Once you manage to get out of debt and boost your credit score, it’s best to make sure you’ll stay on top of things from now on. As, regardless of the fact that you need a loan for your business or you need one for personal use, your credit score will be important.

money management

Below are a few important pointers that can help you stay out of financial problems again

Analyze your situation

Before you decide on taking on a new loan, make a thorough analysis of your financial situation. It’s important to register all your income sources and calculate your expenses to make sure that you will be able to afford the monthly repayment. This is not that difficult to do and there are even tools that can help you with this.

Manage your spending

If you don’t keep an accurate record of your spending, you may not even realize that you’re not being smart about it. It’s normal to have a few guilty pleasures, but it’s important to know how much these affect your financial health.

Track your spending record for at least 3 months and analyze your spending patterns. Can you see any black holes or expenses that could be removed? You can make a temporary cut from certain activities in order to keep your credit record clean.

Don’t delay any payments

Regardless of the fact that we’re talking about bills, bank loans, or subscriptions, you should make sure all your payments are done on time. Any delay can escalate and can stain your credit record or have a negative effect in a different way. Not to mention, that any delay is penalized so you’ll end up paying more.  

If you have a lot on your mind and the bills pile up on your desk, use a calendar app to make a bill payment schedule. Set the notifications with a few days before the payment deadline expires so you’ll have plenty of time to take action.

Overall, it’s important to keep a healthy balance between your income and expenses in order to have a good financial life. This will help with both the credit score and your general state of well-being. Finally, while South Africa is still a region in full development and there are many issues to sort out, there are a few great institutions that can help with your financial crisis. So, out advice is to always think straight and always use the tools at your disposal to be informed of the changes that happen. It’s never wise to make a financial decision when you’re desperate!

 

Have You Been Rejected for Vehicle Finance?

If you have had your heart set on purchasing a new car it can be incredibly frustrating to learn that you have been refused a vehicle finance loan. However, that doesn’t mean that you should give up entirely, the initial rejection does not mean that you cannot secure a vehicle loan at all. With that in mind here are some of the steps you can take to get that dream car even when finance is denied!

1 – Find Out Why You Were Denied Vehicle Finance

One of the first steps to moving forward with your car purchase is discovering the reason why you were denied vehicle finance. Start by approaching the credit provider as they are obliged to reveal their reasons for turning you down. In the majority of cases, the rejection will be because they believe you to represent a risk to themselves based on your past credit history. However, if they tell you what the problem is it makes it easier for you to work on fixing it so you are more likely to be accepted for a car finance loan when you reapply.

2 – Work on Improving Your Credit Score

As noted, the most common reason for being denied finance is a poor credit score. Get a copy of your credit report and look for any problems. First, look for mistakes as these can be removed if you can prove inaccuracy. Next, look at ways to improve your score. These include making sure that all payments are made on time, paying down some debts so they are not close to the credit limit, having different types of credit, show a steady employment history and close unused accounts. It is also important not to have several credit applications all at once as this can signal financial difficulty. If you have been refused finance for a vehicle, resist the temptation to apply elsewhere. Instead, take your time and look at how to improve your chances of being approved by working on your credit score.

3 – Consider A Co-Signer for Vehicle Loans

If your credit score is particularly bad, you may have to accept the possibility that you are not going to be approved for car finance. Lenders will be reluctant to extend credit to individuals who represent a risk. However, it may be possible to have a friend or a family member co-sign your vehicle finance for you. This essentially means that they agree to pay your repayments should you fail to do so.

Universal Branch Codes at South African Banks

Please find below a list of the most common South African Universal Branch Codes. If you’re frequently using online banking or telephone banking and can’t remember the specific codes then this is a fantastic page to keep bookmarked!

List of Branch Codes

ABSA Bank                                – 632 005

Bank of Athens                         – 410 506

Bidvest Bank                             – 462 005

Capitec Bank                             – 470 010

FNB                                               – 254 005

Investec Private Bank               – 580 105

Nedbank                                      – 198 765

SA Post Bank (Post Office)      – 460 005

Standard Bank                             – 051 001

 

The FinTech Evolution

For the past few years, South Africa has been seeing the rise of Fintech firsthand. With the introduction of P2P platforms like RainFin and the Barclays innovation platform, Rise, there are more opportunities than ever to be a part of the FinTech revolution. And the numbers reflect the success story of this emerging market – investment in FinTech has grown by 27% globally per year since 2008.

But where did it all begin? How did the seemingly incongruent worlds of finance and the technological advances of the internet come together?

Arguably since the first ATM opened in 1967, society has been striving to have more control over their money. Since the global financial crash of 2008 plummeted confidence and trust in banks to an all-time low there has been more interest than ever in moving money back into the hands of the individual. Here’s how the evolution of FinTech happened.

RainFin Infographic

Article courtesy of Rainfin.

What is Peer to Peer Lending?

Peer to peer lending (P2P lending), also known as social lending, is the name given to a loan transaction where there is no bank or financial institution involved. Instead, the lender is an investor looking to make a return on their investment (the loan) and the borrower is borrowing money from the investor directly. These peer-to-peer loans are facilitated by technology platforms that connect the lender with the borrower so that they can transact anonymously.

You could get a personal loan via P2P to fund a business, a holiday, a new car, medical bills, for debt consolidation or a myriad of other reasons. This modern approach to lending and borrowing money has a number of benefits associated with it. By eliminating many of the costs of traditional banking it is possible to offer more attractive interest rates to borrowers while at the same time offering better returns to investors than traditional investment options. From an investor’s point of view, this is obviously a more high risk investment than say placing your funds in a savings account at a high street bank, but the peer to peer lending platforms reduce the risk by carrying out credit checks and vetting the quality of the loan projects on behalf of the lenders. It is also typically the case that multiple investors fund one loan, so as an investor you don’t risk having all your eggs in one basket so to speak.

If you want to borrow money through a P2P lending platform you need to provide some basic information such as how much money you need and how you plan to use it. You will then receive a loan offer. If you are happy with the offer you can formally apply for the loan at which point you need to supply some additional documentation. You’re typically asked to provide bank statements and pay slips for the last 3 months as well as a copy of your ID and a utility bill as proof of residency. Once you have agreed to the conditions of the loans and formally applied, it is then advertised to investors on the platform so they can decide whether they want to invest in your loan project (i.e. whether they want to lend you money). Once your loan is funded you receive notification and you electronically sign the loan agreement whereafter the funds are transferred to your account, usually within a few days.

The process is designed to be easy and pain free for all parties. The great thing about peer to peer lending is that investors have an opportunity to help real people by investing to fund projects that can transform their lives. There are numerous success stories such as small businesses that flourished as a result of a loan that helped them get started where a big bank wouldn’t lend, etc. At the same time it’s important to remember that with any loan you take you need to repay the money at some point, with interest, so you need to be careful not to borrow what you can’t repay.

Managing Your Debt

Debt Consolidation is a way of paying all your debts with one new loan. You may have too many debts to pay each month, some at very high interest rates. If you qualify for Debt Consolidation you will be able to borrow a certain amount of money at a lower interest rate and pay off all or most of your monthly debts as fast as possible. The money for this loan will be advanced by your mortgage lender if you qualify. You need to own your own home and be paying off a first mortgage bond or have finished paying already. If the mortgage lender considers that you will be able to pay off a second bond on your home, they will advance you a certain amount of money. This amount will depend on how much you still owe on your home, your payment history, and your ability to pay off both bonds at once. You may also qualify for a re-advance, which means that the lender advances you a sum of money up to the original amount of the first bond. Bond interest or home loan interest is usually at a much lower rate than other interest rates, because the loan is secured by your property. The best source for a new loan will be the equity in your own property which has usually built up some increased value over time. The new loan that you get is then used to pay off all your short-term debts or at least the ones that carry the highest interest rates.

What you need to be very careful of is defaulting on this type of loan. If you don’t pay at least the minimum amount to the credit provider every month, you could easily lose your home, and this is the last thing you need to happen. It would be a very good idea to pay off the new loan as fast as you possibly can, and forego all new impulse purchases like a new car, a holiday, a pool etc. until you have managed to pay off the new loan. Many people who receive a loan of this nature tend to forget the reason they took the loan in the first place, and start spending the money on other things instead of paying back the loan as quickly as possible. Try to make a larger payment than the minimum every month, and in this way you will save a fortune in interest, and reduce the term of the loan as well.

You could consolidate your debt by taking out a personal loan, but you should only consider this once you have tried to take out a second bond or a re-advance, as personal loans usually carry very high rates of interest, and this is surely what you want to get away from. You may want to consult a debt expert before you do anything rash, as you need to get yourself out of debt rather than deeper into debt.

Be very aware that by taking out a debt consolidation loan you are replacing short term debt with long term debt, as the term of a bond is usually at least 20 years. This means you will be paying off your loan for many years to come. Once again, the best way to save interest and shorten the term of the loan is to pay back as much as you can possibly afford every single month and never miss a payment.

Can’t afford a new Car?

You need to buy a vehicle but you can’t afford a new one and you decide to buy a used car instead. The used car may come from a private seller or from a dealer who perhaps can’t help you with finance. If you don’t have the cash, how can you do it? Most dealers are not able to finance older vehicles, and private sellers are only interested in cash.

The answer could be to apply for a vehicle finance loan from an Authorised Financial Services and Credit Provider who deals with such matters. It is possible to obtain private vehicle finance subject to approval by the credit provider. The size of the loan typically starts at around R30 000 and goes up from there, according to your ability to service the loan. Repayments usually range from 12 to 60 months, and various plans are available such as leasing or instalment sale. If the payments seem too high initially, it may be possible to arrange lower monthly payments with a lump sum or “balloon” payment at the end of the term. This does mean however that you should try to save up enough money every month to pay the final lump sum.

As in the case of personal loans, it is necessary to take out insurance in case something unforeseen happens to you and you are unable to make the payments. The lender will require certain information from you when assessing whether they can grant you the loan. This information includes the make, model, model year and mileage of the vehicle you intend buying, the seller’s details, a copy of your ID and Driver’s Licence, a utility bill, a copy of your latest bank statement showing your salary deposit, a copy of your latest payslip and your spouse’s employment and salary details (if you are married).

Most major banks in South Africa like Wesbank and Nedbank offer some fantastic loan deals.. Be sure that you are happy with all the terms of the loan you are offered, and shop around for the best deal before entering into any agreement. You should also be sure that you understand all the terms of the agreement before you sign. You should also take into account that if interest rates rise over the period of the agreement, you may be required to increase your monthly payments unless you go for a fixed interest option. Ask for the different options and their costs to be explained to you.

Students – How you can get your foot on the ladder

Students studying at tertiary institutions need money to pay for fees, books, laptops and other necessary equipment. This can amount to a very large sum over the number of years required to graduate. How would a student have this money available if they have never worked or are only working part-time? They are in a catch 22 situation – they need to study in order to get a good job but they can’t earn enough money to pay for their studies without being in a fulltime job and earning a good salary first. The solution is to apply for a Student Loan.

There are certain credit providers in South Africa who cater for the needs of students. Your bank may provide you with a loan, and in addition there are other organisations that specialize in lending money to students. It is possible to borrow money for your studies without any deposit, and pay it back in fixed instalments month by month. The money you borrow is paid directly to the university or other institution so that you don’t need to have the extra bookwork each month.

In order to get this student loan approved, you could ask your family, employer or even a good friend to sponsor you and apply for you. Of course they themselves need to be able to meet the standard affordability criteria when applying for the loan.

What you need to know before applying for a Personal Loan

Anyone can run short of money for various reasons. The South African economy, like many other economies across the world, is going through a difficult period, and people are finding it very hard to pay their bills. This affects different people in different ways. You may for example need to repair your car or buy new tyres. You may need to pay school fees for your children. You may have to cover unexpected medical expenses. Your house may need some repairs. These things usually happen when we can least afford them. If you cannot afford these extra expenses, the answer could be to apply for a personal cash loan from a reputable lender, preferably an Authorised Financial Services and Credit Provider. The National Credit Act should protect you from getting into further trouble, as the lender has to abide by the law, and is not allowed to lend you money that you cannot afford to repay.

If you decide to apply for a personal loan, you will have to meet certain basic requirements. The following are some examples of what is usually expected from you. Some lenders may have slightly different requirements.

  • You must be over the age of 18.
  • You must be in formal employment, which means that you must have a regular job.
  • You must have proof of residence, in other words you need a document to prove where you live (your home address). This could be a municipal account, a TV Licence, an account from a large retailer etc. This document must not be more than 3 months old.
  • You must have a copy of your latest payslip from your employer.
  • You must have a valid South African ID document.
  • You must have your latest bank statement to show the lender that your salary has been deposited.

When you fill in the application form for a personal loan, you will need to answer some questions. You need to be accurate with your answers. A credit check will be carried out, and if they decide that you are able to afford the repayments, you will be contacted by the lender and told how much you can borrow, for how long you can borrow the money, and how much you have to pay back each month. You will also be told what the rate of interest is on your loan. Personal Loans usually range in value somewhere between R4 000 and R100 000.

Once you sign and return the agreement, the money will be deposited in your bank account. You will need to make a regular monthly payment after that until you have paid off the loan. If you manage to make regular payments and have already paid back a reasonable amount , you may want to borrow some more money, and this can sometimes be done if you still meet the original requirements.

It is also advisable to have insurance cover against death, permanent disability, dread disease and retrenchment when taking out a personal loan. In the event of something unforeseen happening to you, some or all of your payments could be covered, depending on the wording of the policy.

Home Loans – the largest sum of money you’ll ever borrow

The largest amount of money you will probably ever borrow during your lifetime is usually for your first home.

Home loans or mortgage bonds as they are also known, are available through various sources. Most of the major commercial banks offer home loans to qualifying clients. If you have a bank account with one of the big banks, it may be a good idea to approach the Home Loans department when you are planning to buy a home. The long and sometimes difficult process involved in buying a property can be made a lot easier if you manage to get what is known as pre-approval for a home loan. You will be asked for proof of identity, proof of income, lists of investments and assets held, lists of debts if any. The loans officer at the bank needs to assess your affordability of the loan you are applying for i.e. whether you will be able to pay off the loan on a regular basis. Once you have been assessed and the necessary credit checks have been conducted, you will be called in and offered a loan of a certain value for a certain period of time (perhaps 25 years) and at a certain rate of interest. The interest rate is based on the prime overdraft rate offered by banks to their clients. This rate is not fixed, and will move up and down many times over the period of the loan. It is critical that you understand this, as most people borrow as much as they can afford to pay back without building in a safety margin in case the rate of interest should increase. You will be told what your monthly payments are going to be based on your nett earnings and possibly that of your spouse or partner who intends to occupy the property with you. You will also be required to take out a life insurance policy known as mortgage protection in case something should happen to you and your spouse or partner is unable to continue paying off the bond. You could cede an existing life policy if you have one. It is not essential that you buy a policy from the lender – you can approach any insurance company or broker and get comparative quotes before signing up. In some cases you may want to take out what is known as an income protection policy which protects you for a limited time in case you are injured, become ill or lose your job.

The amount the bank may offer you is controlled by the National Credit Act. You will not be offered any more than you can afford to repay at the time of applying for the loan, based on the information available. When you eventually start looking for a property to purchase, you will be armed with a letter from your bank showing that you have been approved for a bond of a certain value. This will assist the property agent because it gives the seller of the property confidence that you can come up with the required money if he accepts an offer that you make. You will usually be required to put down a deposit on a property that you intend to buy. This deposit is the difference between the bond amount granted and the agreed selling price of the property. The deposit will be held in trust by the seller’s attorney and interest will be earned thereon for the benefit of the buyer.