Loans for Bad Credit ?
Sometimes the people that need loans the most are turned away because they have a low credit score or a bad credit history.
Some credit products are directly available to people in your situation, but they come at a reasonably high price. Despite all this, you should not despair.
Getting a Loan with Bad Credit
We all have a nature of fighting for the good things we need in life. All activities that humans undertake there is an aggressive push for attaining higher results. Although this is how we want things to go, sometimes we lose the grip and fall below the standards.
Such is the situation in the lending and borrowing activities; we all borrow intending to repay in time so that we can improve our credit standing. Here and there we fall behind with loan repayment deadlines and credit bureaus are inflexible to problems that we face.
The truth is, behind every failure to return a loan, there is a vivid reason, and that is what loan clients weigh and forgo the option of holding a good credit rating.
What Is Bad Credit?
Credit bureaus determine one’s credit scores, and these are companies that are responsible for the recording and assessment of your credit history. When one is said to be having a bad credit score, they will be holding credit points below the minimum required level.
Credit scores are numerical points allocated to an individual or company. Upon finishing debt repayment, this means that when one closes a loan within the required time frame, they will have a better credit rating than those who missed repayment deadlines.
When a credit score reaches points below the average, which is usually 530 points, the applicant will be considered a bad credit holder.
What does a bad credit score mean?
Bad credit scores mean that the applicant will have problems in accessing credit facilities, these could be personal loans, short-term loans or quick loans, but the procedure for credit assessment remains within the line of working with credit bureaus.
Credit providers consider bad credit as an indicator of a higher credit risk, which has significant threats for profitability. Bad credit can have hindering effects on the standard of living of any individual, and this is why loans for bad credit were designed.
What are loans for bad credit?
These are all forms of individualized credit extensions made to all people who have an adverse working history with credit bureaus. These indicate a significant part played by financial institutions to facilitate financial inclusion through personal loans. Loans for bad credit will allow borrowers a second chance to improve their financial standing despite their bad history. At the same time, it enables the applicants to have an improved credit score.
Loans for bad credit do take account of both the client’s history, but placing much emphasis on the internal assessment by credit staff.
Where to obtain loans for bad credit?
Loans for bad credit are issued in line with the provisions of the National Credit Regulator (NCR), which means all the providers are required to comply with the National Credit Act of 2005.
As the loans for bad credit represent a section of personal loans, they are issued with registered micro-credit institutions. These can be sole traders, companies, and organizations that hold valid NCR licenses. The banking sector has failed to address financial shortages for people with bad credit effectively, and this has resulted in micro-finance institutions dominating in the provision of loans for bad credit.
The best way for one to access loans for bad credit is through a loan agent or a loan brokerage. The applicant will be presented with a list of credit providers that afford clients who once defaulted with second chances to apply for loans.
The loan applicant will get a filtered list where the loan brokers have conducted research and identified the companies with good working history. Companies that are most common for issuing loans with bad credit include Show Time finance, Challenor, and Finhound. These will make sure that one access a loan for bad credit that allows you to improve both your financial status together with the credit rating.
What loan amounts are issued for people with bad credit?
Loans for bad credit are issued in similar nature to consolidation loans and refinance loans, with the exception that, loans for bad credit will take smaller amounts.
Clients who once defaulted are associated with, loans for bad credit will have a relatively smaller loan amount. Clients with a steady recovery from their adverse history. The issue rests on the matter that smaller loans are more comfortable to repay.
For clients who have defaulted a loan before, they might be having more substantial financial instability which could easily trigger them into over-indebtedness.
The vast number of loans with bad credit come in amounts that range between R500 to R8 000, making loans for bad credit a section of short-term personal loans.
However, there are specific scenarios where the loan for bad credits in amounts that exceed R8 000, and these will be particular loans like refinance and bridging loans. In situations when the loans are secured, the loan amount can also be substantial, although a client could have had a bad history.
Ultimately your level of credit rating will determine what amount you are capable of borrowing. When one holds a more substantial credit score, and the amount will be higher. When the credit score is shallow, the amount will also be expected to be lower.
At what cost do we acquire loans for bad credit?
Loans for bad credit have slightly higher costs as compared to other types of personal loans. The major push behind this is the risk that the loan provider gets exposed to whenever they intend to provide with such a service.
Similar to other personal loans, Loans for bad credit also come with four components of costs in addition to the notorious interest charge. These charges are initiation fees, service fees, administration, and on different scenarios, clients can also expect to face penalties and late payment charges.
These form the total costs that clients face while repaying a loan with bad credit. All applicants should cautiously observe and inquire about all the expenses that they will be exposed too.
The National Credit Regulator has made provisions for interest rates to protect the public from excessive charges posed by providers of loans with bad credit. They are giving a restriction of a maximum fee of 5% per month or the effective rate for periods longer or smaller than a month.
Loans with bad credit will come with a one-time initiation fee that all new clients should pay. There are also administration and service fees that are paid to facilitate the administration and collection of repayment fees.
Clients who fail to facilitate timely repayments on these loans also get exposed to penalties and late payment fees.
How to obtain loans for people with bad credit?
Loans for bad credit are relatively uneasy to obtain primarily to clients who do not possess relevant collateral security.
One will need to go through the traditional way of making a loan application to obtain loans with bad credit. There are three ways in which prospective clients can lodge their applications. Include applying through a loan broker, the company, or a service provider who source funding to facilitate the purchasing of their products.
When an applicant applies through a loan broker, it becomes the easiest way to obtain a loan for bad credit. It serves the applicant with time efficient and ready list of companies that provide loans for people with bad credit.
The applicants will need to lodge their application before the broker presents the requirements of the applicants to companies that issue such a product. The companies will bid to take the client, and one with the best solution will be made to contact the client where they will strike their deal.
When a client finds a company that directly provide loans for bad credit, they can apply the same way with short-term loans. The applicants will need to fill online application forms with their personal and financial information before submitting their documents.
The application process progresses typically with the signing of terms and conditions, which will allow the applicant to submit the whole application process.
What is needed to acquire a loan if you have bad credit?
The providers of loans with bad credit are required by the National credit regulator to exercise due diligence in facilitating loan applications.
This will involve collecting details and documents that allow the loan provider to make proper credit assessments to ensure responsible lending. Generally, loan applicants are required to be South African citizens, those who are employed with a regular monthly income that is received through a South African bank account.
The applicants will need to be adults that fall between the age ranges of 18 years to 64 years. In addition to that, the following documents will need to be provided during the application process.
1. South African national identity document
2. Three months stamped bank statement
3. Proof of residential address that is not older than three
4. Latest pay slip from the current employer
What are the terms of repayment?
Once a client has been given a loan with bad credit, the next thing will be making the relevant repayment. The size of the loan determines the repayment of a loan with bad credit. Also, the credit rating of the applicant. One has a good credit rating; they can be afforded with a more extended repayment period.
The loans for bad credit are typically obtained with repayment periods that stretch from weeks to a year. Loans for bad credit can be issued in the form of payday loans, short-term loans, and quick loans. Providers accept clients with credit scores below the average of credit bureaus.
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