CASH LOANS IN SOUTH AFRICA
You are in a desperate need of immediate cash, which has made you run from pillar to post to get a loan. However, your credit history depicts you as a poor payer or a defaulter and being short of money you find yourself in the doldrums as you can see no escape from the emergency that you are in. If you have bad credit and need loan you are not alone and there are many like you who find themselves in such a crisis. Thus, in view of such borrowers, many lenders in the financial marketplace have resorted to providing loans for people with bad credit. Not only that, but there are different beneficial ways to get quick, express loans without the nagging hassle of having to provide lots of paperwork, prove your credit worthiness and basically hope for the best. In this day and age we have express loans for people with bad credit, payday loans and short-term loans. These are ideal loan packages designed to help you improve your circumstance without the long term repayment commitment that traps many people.
Bad credit loan
The main advantage of a bad credit loan is that you’re able to borrow cash, even if you have a terrible credit history. There are many other benefits and advantages of bad credit loan that makes it popular than other type of loans where credit history required. The best part of bad credit loans is that you need not worry about your past credit record since the lenders do not bother about such things. Instead, they look at the capacity of the applicants to repay the loan in future, unlike conventional methods of lending where the past financial record forms one of the main factors on the basis of which a loan may be out rightly rejected. Short-term loans can be faster to obtain if they are relatively small, as they often are, because lenders do less underwriting (that is, evaluating your creditworthiness) for small loans. These loans can be used to plug cash shortages resulting from unexpected expenses, sales shortfalls, seasonal effects or other reasons. Banks are the usual source of long-term business loans, but short-term loans are available from alternative sources, such as online and peer-to-peer lenders.
A peer-to-peer loan is arranged on a website where borrowers and lenders come together and negotiate terms. The growth of the alternative lending industry has given small businesses, even ones with less than good credit, more opportunities to get short-term loans. Competition among these lenders helps to keep interest rates relatively low. Payday loans are great cash advances for anyone who can pay them back on time. By applying for a no fax payday loan you may even get approved within a few hours. They are suitable for paying an unexpected payment, going on a short vacation or to buy something you find necessary but don’t have the money at the present time. The hassle free process of getting the fast payday loan is what makes this type of personal loan unique.
Anyone above eighteen years of age with a monthly salary and a checking account is eligible for the payday loan. Even people with a bad credit history are guaranteed to get the loan when applying for a bad credit payday loan. Due to the competitive market you may find a lender that offers you a good rate and approval will take maximum 72 hours. The cash is deposited into your checking account in a few hours or days, making access to the money very convenient. Online lenders are a great source to begin with and the option of comparing payday loan rates comes in handy.
In the 18th century, South Africa had the one of the largest gold rush, a situation which resulted in a massive inflow of populations from all over the world. The Rand area grew exponentially and resulted in the massive economic development and an uprising to Africa’s largest economic hub. The gold rush saw the emergence of Gauteng province, a small area which has grown to be the financial hub of Africa. Gauteng has now become home to Africa’s largest banking system, where cash, bonds, marketable securities and other financials are now traded.
In the modern day, many banking institutions have established their operations in South Africa. The country has presented unending opportunities to financial institutions on which most have set headquarters which oversee operations from other parts of Africa. The South African Banking sector controlled by a privatized reserve bank, unlike other countries in the world where the government have a controlling role. This is where the currency and most of the banking laws emanate from before they are made to be bills in the parliament. When one analyses it, there is a massive representation of the private sector in the banking system, a situation which has resulted in competitive financial system in the country.
WHAT IS BANKING?
In the early times, banking used to be defined by the act of depositing and withdrawing money from a banking hall. “Well!, that was all that banks did”. In modern day banking involves a broader concept of financial management. Banking is the act of managing the financial deposits and withdrawals of banking customers to facilitate a smooth flow in the financial system. The modern banking system involves the trade of foreign currency, stocks, provision of credit cards and the facilitation of imports and exports. Amongst all these, banks are the major players in the lending of money and provision of credit to the citizens of any nation.
WHO DO BANKING SERVICES?
The banking sector is a strictly regulated sector of the finance system, unlike personal loans and short-term loans. The registration of banks requires a lot more than just compliance with the finance acts. For an institution to start offering banking services it has to meet, minimum capital requirements, minimum infrastructural and staff requirements, get their intent approved by the minister. In addition to these the organisation should also align its operations with FICA, NCR and other financial laws of South Africa.
Unlike in quick loans, pay-day loans and vehicle loans where there are vast number of players, some of which are only known in the area of their operations, all the companies that operate issuing banking services are commonly known to the public. South Africa is home to the largest banking institutions in Africa, with the FNB being the oldest bank in the country. ABSA and Nedbank are the most common banks in South Africa, the institutions have operations in every town and village, banking from on-line, corporate and mobile. Other common banks include, Capitec, African Bank, Standard bank, and others. Amongst the banking institutions in the country, there is the Old Mutual Group, this is a financial institution which has become large to an extent of influencing the financial affairs of Africa. From the Johannesburg Stock Exchange, the Old mutual shares are used as a point of reference for forecasting economic growth.
WHAT IS THE ROLE OF BANKS?
Before money was introduced in the world, people would exchange products in a system that was known as butter trade. This system would require a person to find someone who had a need of what they would be selling. Say, a person who have a goat looking to buy clothes. This form of trade had complications on two areas that, there was a need to find a person who needs what you have and when the value of items being traded does not par, there would be a problem of change. The butter trade system was also carried at a single place (marketplace) where those who were not presently there would lose out.
Banks play a major role in the economic and social development of any modern economy. These are the institutions that facilitate financial intermediary role for the people and those they want to trade with. The roles of the banks are to bring money, regulate financial affairs of a country, facilitating trade and financing of various social and economic activities. The banking system has brought an ease to the livelihoods of people, the system has reduced all complications that were linked with trade, financial exchange rates and the determination of values for our possessions.
WHAT IS FINANCIAL INCLUSION?
Over the years the banking sector was working in a segregation way, the formal banking and financial operations were only accessible to the people who were rich and those who were working with stabilised income. This resulted in a vast number of the population being segregated as most economies could not provide jobs for everyone, at the same time not all people could be business people. Banking and finance became a thing of the rich people until the concept of savings account was popularised. It is from this concept that financial inclusion was born out of.
Financial inclusion is the engagement of previously segregated individuals into the services of banking and finance. It ranges from banking, lending and conducting financial education so as to enable the previously marginalised people to access financial services and allow the nation to develop as a whole. Banks are at the core of facilitating financial inclusion. These institutions are mandated to conduct financial education, provide services that are not only profitable but of development nature in order to eliminate false economic development where an economy has a large number of poor people and a few rich people.
WHY SHOULD I GET BANKED?
In our everyday lives, we use money to gain money. The unfortunate element of using and gaining money in South Africa and the whole of the world over is that, when the exercise starts, it engages our brains in a busy gear. We ignore the activities around us and try to concentrate on the monetary activities and this makes us a target to criminals and thieves. Banking allows us to keep our monetary wealth safe. In the bank, your money will not only be safe from thieves and robberies but also from damages. Money in its large quantities, come in form of bills, the bills are papers which can be damaged by water and fire. The banks have specialised storage facilities for money that will prevent water or fire damage.
Money also works in a circus, and when you hold it in large quantity, it means you are crafting a shortage of money somewhere. When there is a shortage of money where it has to be used, the person who is withholding money is forgoing a gain. The banking sector circulates money, providing those who need it with loans, giving interest (gains) to those who wish to extent money to others. The point here is that money kept under the bed or in the lock-set does not gain anything in terms of interests. In the bank the same amount could be protected from theft at the same time it will be increasing in value.
IS MY MONEY SAFE IN THE BANK?
It is normal for men to be considered about the safety of their hard earned wealth in the hands of a bank, after all a bank is an institution that is manned by human beings who also need money. In all countries in the world, the banking sector is a strictly regulated sector. Both the government and the apex bank put measures that ensure that banks are a safe area that individuals and organisations can store their wealth. The banking institutions are registered financial institutions, who are issued with licences that are reviewed at short time intervals. The authorities that regulate banking put measures and provisions that insure a higher level of transparency, efficient risk hedging measures and efficient capitalisation to ensure that depositor’s funds are readily available in the banking halls.
The banking sector has companies that are champions of transparency, because the companies are entrusted to keep depositor’s wealth, the staff and management of banks are trained, honest and experienced in dealing with money. In addition to that banks employ vast number of credit staff, there are men and women who spend their days and nights calculating and developing ways of shielding your wealth from financial risk. In that way, one can always be sure about the safety of their funds in the bank.
Unlike other organisations that hold audits once or twice in a year, the banking sector has a daily engagement of audit procedures. On every tailor’s desk, there are cameras that survey their actions, these are capable of detecting all mistakes and suspicious activities from your initial engagement with the bank. This means that the bank can protect your money from being used in bad activities like money laundering at the same time giving you the best of value.
HOW MUCH CAN I WITHDRAW FROM A BANK?
All banking institutions ins South Africa are obliged to work in line with the FICA requirements. FICA is the financial board that regulates the financial affairs of any finance institution for the good of the South African community. The presence of FICA, try to protect the community against the acts of money laundering. Money laundering is the act of using money to engage in illegal actions. The act of money laundering normally range from illegal trades, drug dealing, kidnapping, illegal financial lending. The FICA tries to curb the impacts of money laundering by putting limits on the amounts that individuals and companies can withdraw from a bank.
In South Africa, the daily cash withdrawal limit for individuals is R4 000, this is the money that individual banking clients can access from their accounts without going through meetings with the banking staff. The reason behind that is to limit the untraceable activities that individuals can do with cash. As we all know, individual actions are unlike corporate activities that are monitored and audited on every financial transactions. Individuals can easily engage in illegal activities whenever they have cash, because cash expenditures are untraceable. It is these illegal activities that are referred to as money laundering and FICA is doing good to protect us from.
HOW DO I OPEN A BANK ACCOUNT?
In South Africa, opening a bank account has become one of the easiest things. One can open a bank account from their cell phone in an instant. Opening a bank account in can be done on-line or by visiting the banking hall of the bank of your choice. The on-line way involves one filling in their personal and financial information before making mobile OTTP confirmations. The bank account will be made active when the applicant takes their documents to the financial institution for verification. Below are the documents required when one needs to open a bank account
- An identity document
- A proof of residential address
- A latest pay-slip from the current employer
Money is one of the most important things we need to meet our everyday supplies, as humans we work so hard to obtain some financial gain but it is not definite that we always acquire the funds when we need them, thus sometimes we require personal financial backup. The personal financial back up comes in several ways, and some would do savings, others opt for business ventures, while a large number of people opt for personal loans. These all save the same purpose of covering the financial gap that is created by fluctuations in our incomes or the occurrence of unforeseen events.
In South Africa, the populace favours the use of personal loans than the other way of enhancing personal finance. These are ordinary citizens who might not have the capital or lack of surplus to make investments. Personal loans are micro to medium financial credit extended to individual borrowers by financial institutions in return of an interest charged repayment. These loans come in various forms that are classified on the size of the amount, length of the repayment period and the function intended. Personal loans can also come in the form of secured or unsecured financial credit, this will depend on the size of the amount involved in the deal.
Personal loans come in a variety of loans, with the most common ones being quick loans, short-term loans, shopping loans, overdraft facilities and payday loans. Personal loans can also be acquired in the form of housing loans, educational loans, business start-up loans and vehicle loans, these are generally large in monetary value, in addition to that, they are issued as secured loans. In many scenarios, the assets financed by such a loan will be used as collateral as the lender try to curb the default risk and loss given default (L.G.D). The nature and amounts of personal loans that are issued in small quantities generally have lower risk and so, many providers of micro-credit services issue these as unsecured personal loans.
LEGAL PERSPECTIVE OF PERSONAL LOANS
There are strong regulations for the issue of personal finance in South Africa, with the National Credit Act (NCA) of 2005 regulating the activities of both individual credit providers and regulators. This bill led to the formation of the National Credit Regulator (NCR), which is the ultimate regulator of financial lending before the minister of finance. All personal loans issued should comply with the provisions of the NCR. The NCR provides and updates regulatory guidance on matters relating to interest rates, responsible lending and ethical practices for issuing personal financial credit.
In South Africa, personal loans can be issued by companies, organisations or sole traders who are registered as a provider of credit services. These providers are issued with operating licenses, copies and details of these licenses should be displayed on the business premises where the public or any other stakeholders can view them. The national credit regulator performs random checks on the personal credit providers, issuing and terminating licenses over a specified period. Although this has been successful in many areas, it does not route out the existence of money laundering and unregistered lending activities that are rife in most parts of South Africa.
It is a regulatory requirement for personal loans issued in South Africa to be in line with all responsible lending practices. Personal credit providers are obliged to undertake screening and credit assessment of personal loan applicants. This involves checking the credit rating of the applicants through relevant credit bureaus and performing internal credit assessment to facilitate that right amounts are given to clients. This is done to prevent the financial institutions from providing personal loans to clients who cannot make repayments at the same time preventing money laundering activities.
The NCR also require the personal credit providers to disclose all relevant terms and conditions that the clients before exposing them to the personal loan package. This is in line with the ethical financial practice that tries to shield loan applicants from being charged with excessive penalties and hidden costs. The National Credit Regulator also makes provisions for interest rates on all personal loans, and these are provided to prevent credit providers from charging excessive interest rates. The interest rates are currently pegged on a maximum of 60% per year on the effective interest rate.
Short-term loans are personal loans of short repayment nature, and these are private loans issued with a repayment period that does not extend beyond a period of six months after the disbursement of such an investment. These loans usually are published in amounts that do not exceed R8 000. A short-term personal loan is sometimes a term used as an umbrella term for a variety of other investments like payday loans, quick loans, shopping loans and other emergency loans. These form of personal loans are generally issued in small amounts, which makes them favourable for clients who need to have a quick impact on their credit scores.
This category of personal loans involves the extension of financial credit in an instant or over a short time. One can be able to obtain a quick loan from as little time as a minute from completing an application. Quick loans are issued in small amounts to clients who have an excellent working history with the micro-credit service provider, thus reducing the time for lengthy credit assessments since the client would be already known. These form of personal loans are beneficial to clients who would be looking to finance a critical incident at the same time having the willingness and ability to abide by the quick loan covenants.
These are personal loans issued only to permanently employed people who receive regular remuneration as salaries. Payday loans may be more comfortable and faster to acquire, but they have some strict requirements where the credit provider will be looking to authenticate the loan applicant’s state of employment. Payday loans are generally small loan amounts that have interest charged on the number of days the applicant take to repay. A payday loan repayment is a one-time payment which is deducted on the day the client’s pay or salary is reflected in the bank account.
These are credit extensions provided by financial institutions in partnership with retail companies and shops. They are basically personal loans of short-term nature that are meant to cover the financial shortage that people experience in their shopping activities. Shopping loans and payday loans have a similar kind of repayments, which is a one-time repayment which is deducted from the borrower’s salary.
Personal loans also come with a more extended period of repayments where more massive amounts are provided with collateral. These personal loans are the best way people can improve their livelihoods or facilitate the achievement of their own life goals. Generally, long-term personal loans come in amounts that are above R8 000 combined with a loan term that ranges from 6 months to seven years. The most common types of long-term personal loans are vehicle loans, educational loans, housing loans and business start-up loans. The large amounts involved in these loans has resulted in many lenders requiring collateral security or issuing the assets financed under the scheme as collateral.
Amongst the variety of long-term personal loans, vehicle loans are the most common in South Africa. These personal loans are issued with the aim of facilitating the purchase of a vehicle on which a qualifying client would have chosen. Vehicle loans are normally issued with large financial institutions in partnership with vehicle manufacturers and car dealers. These are loans secured with the vehicle under the purchase, a client will be allowed to use a car whilst making payments for it through the bank. In many cases, ownership of such a car can be successfully passed to the client when the payment has been finished.
Educational loans are the most common type of loans issued to the youth, and these personal loans are regarded as the best solution for social development and youth empowerment. Educational loans take the form of more extended repayments and lengthy grace period, and this will be depending on the length of the course that the applicant will be receiving. Educational loans come in two forms, that is those provided by the government and those offered by private players. With private credit providers, the applicant will be required to be a working individual who has a child or dependent enrolled with a tertiary institution. When such a loan is issued, it is paid directly towards the fees and the applicant will be required to make payments from there onwards.
On the other hand, educational loans issued by the government, non-governmental organisations and other non-profit making institutions are only repayable after the term of study. Here, the applicant will be a student who will receive funds that cover fees and education-related expenses. The applicant will be issued with a job upon graduating and it is from that employment where the repayment will be deducted.
Large financial institutions also issue personal loans in the form of housing loans. These are secured long term loans where the finance company builds or buy a house for the applicant in return for repayment over a more extended period. Housing loans typically come in the form of debentures, but they can also be issued with pension funds where the pension of the applicant will be used to settle balances. Personal finance is a type of housing loan is the cheapest in terms of interest rates and administration costs.
BUSINESS START-UP LOANS
In South Africa and Africa as a whole, it is believed that the reason behind low economic growth is the lack of capital to initiate commercial ventures. With that, some banks and other financial institutions have devoted their resources to the economic development of the nation through the provision of business start-up funds in the form of personal loans. These are loans issued to facilitate the purchase of property, plant and equipment that qualifying individuals might need to start-up businesses. These personal loans can also be issued to facilitate the purchasing of current assets, restocking and other elements of working capital.
OTHER PERSONAL LOANS
The personal financial lending business in South Africa does not only end with short-term and long term loans as there are different types of loans that are classified as per function. These include refinancing loans, consolidate loans, loans for bad credit and property finance. These form of personal loans can be encompassed on short-term or long term loans depending on nature and length that the issuer intends it to be.
Refinance loans are meant to give a credit boost to the borrower; they are issued to finance the repayment of another loan. Consolidate loans also work to provide a credit boost to borrowers who would be nearly over-indebted by several loans. A Consolidate loan will repay all other loan balances and allow the applicant to pay a single loan. Loans for bad credit are the form of personal finance extended to clients with a low credit rating or those under debt administrations. On the other had property finance is financial credit extended to clients who wish to buy any form of fixed assets, property finance generally come as a secured personal loan for assets that are long term in nature. The most common types of assets financed under property finance are houses, plants, farms, investments and other immovables.
OBTAINING PERSONAL LOANS
In South Africa, personal loans are relatively easier to get as compared to other African countries. This can be traced to a large number of personal loan providers and the high circulation of money, which always see the individual loan providers competing for clients. There are significant financial institutions like Old Mutual, Wesbank and Sanlam, which are known providers of cheap personal loans. The others include banking, micro-finance and micro-credit institutions which provide personal loans as part of their core business.
There are three common ways of obtaining personal loans in South Africa that is through the credit provider, an agent/broker and a partner. The individual loan applicants can get their loans by applying directly through the loan provider, which is the customary way. In addition to that, there is a large number of loan brokers in South Africa, and these are an organisation that specialises in research, the advice in addition to facilitating the application of these loans. Ultimately the finance company may also work with partner companies, providing loans for the purchase of goods and service from these partners. These usually include car manufacturers, real estate companies, shops and tertiary institutions.
The ultimate stage for obtaining a personal loan is making a loan application. Like most parts, the country has made intensive technological uptake, in this section, as most of the small companies providing personal loans only make an online application. However, more giant corporations have blended the paper-based form with an online form. One might also expect to find a few companies that still use paper-based application alone. Despite the type of application you make, all the applicants will undergo credit assessment before they can be granted with a personal loan.