If you are one of the millions of South Africans who have a poor credit record, you’ll know how difficult it is to borrow money. Banks and other financial institutions view you as a bad risk. As a result, the likelihood of qualifying for an unsecured personal loan is slim, at best.
In this article, we consider the variables that determine your credit score, and how your credit rating affects an unsecured loan application. We also explore a practical solution – short-term bad credit loans against your assets.
Your credit score is a numerical value that’s meant to indicate your credit “worthiness”, or how likely you are to pay back a loan you’re given. Banks, credit bureaus and other financial institutions analyse and evaluate a range of variables, and then rate you accordingly.
Factors affecting your credit score include, among others, your:
Before approving an application for an unsecured personal loan, a bank will check your credit record. Based on the information provided, a credit score is calculated.
Banks use thresholds in the same way rating agencies use grades to determine a country’s investment rating or cost of borrowing. The lower the rating, the more expensive it is to service debt, as we’ve all recently discovered when South Africa was downgraded to “junk” status.
If your credit score is too low, your application for a loan is likely to be rejected. A slightly higher score may mean that you’ll qualify for a loan but only at a high interest rate, to offset the lender’s risk.
If you’ve never applied for credit before, you may struggle as much as someone with a poor credit rating to get a loan. This is because lenders will have no way of gauging your credit worthiness.
Asset-based loans are financial lifelines for South Africans with low credit scores.
In the case of an asset-based loan, an asset you offer – from an item of jewellery to a car or commercial property – serves as collateral for the loan.
This means there’s no need for the lender to know your credit rating, or – like a bank – to use it to guess whether you’ll repay a loan.
Asset-based loans have other benefits too. You can typically access these loans much faster, given that there’s no need to wade through payment and credit histories. Also, this type of loan won’t affect your existing credit rating in any way.
At lamna, we offer fast, discreet loans against the value of a wide range of assets, from business property to luxury watches and jewellery to vehicles or artwork. We also offer bridge loans, in the form of advances against property sales or payments from the Road Accident Fund (RAF).
Our customers’ credit ratings have no bearing on the loans we offer or on the loan repayment terms.
Source: Funding Lamma
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