Loans for Bad Credit in South Africa – Borrowing in Time of Need

Regardless of how much you plan for your financial expenditures, unforeseen circumstances can always hit you up, and here is when credit score comes into play. The higher it is, the lower the risk you pose to a creditor. Major financial institutions do not generally offer loans for bad credit in South Africa. However, there are some other loan-lenders that can help you in time of need despite a history of bad credit.

Loans for Bad Credit in South Africa
Loans for Bad Credit in South Africa

Online Loans for Bad Credit in South Africa

The process of obtaining a personal loan becomes challenging when you have the added complication of bad credit. Unstable financial conditions or a history of not consolidating debt on time can make the procedure way more tedious than it already is.

So what can you do if you are already suffering from bad credit? There are actually some lenders willing to help consumers in dire need of loans for bad credit in SA. But let´s first find out if your credit score is actually that bad. 

Most South Africans know that credit score is used to determine whether or not they qualify for a loan and what kind of interest they get. However, people generally do not know how it is calculated. 

Credit Score – Overview

Each financial institution has a way of calculating it, but they all rely on a credit record. If you have no credit history, you will not have a credit score. A credit report contains a complete record of every individual´s financial history, which indicates how likely they are to honour future credit commitments. Applicants that score 490 and below may not qualify for conventional loans and may need to turn to alternative lenders who offer urgent loans for bad credit.

Things to Consider when it Comes to Loans for People with Bad Credit

There are personal loans specifically designed for individuals with poor credit histories. Since people with bad credit pose a great risk to the lenders, creditors offering this type of loans generally charge higher interest rates. Here are some things you should consider before applying for any online loan for bad credit:

  • Personal loans for bad credit tend to be a costly way to borrow money. They  should be your last resort, so make sure you have considered all your options before submitting your application. 
  • Do not apply for many fast loans for bad credit at once, as it could severely damage your credit rating. 
  • Make use of a “soft enquiry” to figure out how likely you are to obtain an Internet loan for bad credit before you apply. This won’t damage your credit report. 

The amount you qualify for will also depend on how bad your rating is. Obtaining a home loan with bad credit in South Africa, although difficult, is still possible as long as your name has not been blacklisted with the credit bureau. Nevertheless, you want to restore your credit score before applying for such an expensive bond. 

If you finally take out a personal loan for bad credit, be sure to pay it back on time to avoid further interests and penalties. If you manage to consolidate your debt on schedule, you will improve your credit score, showing lenders a responsible borrowing attitude.

Loans for Bad Credit in South Africa – Alternative Creditors

If you have not been able to pay back your debt in a timely manner or have been blacklisted in the past, you will not qualify for traditional loans. Below are some of the most popular bad credit lenders in South Africa: 

  • Government loans for people with bad credit: the South African government runs  special credit programmes to help people who are going through difficult situations. 
  • Peer to Peer (P2P) loans: there are P2P platforms designed to borrow money from private individuals without the need for a bank or any other credit provider. Most of the loans offered with the framework of peer to peer are unsecured. Here are some of the P2P platforms available in the country:
  • Secured loans: you will be more likely to obtain an online loan for bad credit if you offer a financial asset that insures the lender against the loss if you default on payments. Your car, house or any of your assets can serve as a guarantee. 

Regardless of your choice, you must ensure that you will be able to repay the full amount. Under no circumstances you should underestimate the risk which you will assume when taking out a loan for bad credit in South Africa.