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Information banks need to grant a loanIf used wisely, access to credit at a bank can build wealth and enhance your lifestyle. The process of applying for a loan is relatively easy, but you have to ensure that you have all the elements in place to qualify. ![]() Image: www.freedigitalphotos.net "When you apply for a loan, the bank assesses your credit worthiness by doing a number of checks," says Theunis Kruger, head of unsecured lending at Standard Bank. "The bank doesn't only look at how much you earn; your spending habits and behaviour have a big impact on your credit profile, too." When looking at a customer's ability to repay, banks don't only look at your nett take home pay, but they also consider your expenses, employment, and your ability to repay the loan, taking into account the repayments on other debt you might have as well as your living expenses. Another important aspect of credit approval is your credit profile. There are a number of credit bureaus in South Africa that keep records of your credit profile and develop your credit score. Banks, insurance companies, retailers, estate agents and employers subscribe to their services. Credit behaviourThey not only request information on clients, but also provide information on your credit behaviour, meaning that every loan or credit agreement you have is monitored. It is advisable to review the accuracy of your credit report before you apply for credit. You are entitled to one free report from the credit bureaus each year. "If you have an adverse report for unpaid debts, or if it is inaccurate, it's important that you resolve any issues and have the report updated as soon as possible," says Kruger. "If you have a judgement where the creditor has gone to court and issued a court order, a specialist attorney can assist you to get the judgement revoked. Once you know your credit profile is accurate, you can apply for a loan, just make sure to double check that all the information you give the bank is correct, or you could run into financial difficulties in the future, specifically if you took out a loan you could not afford." Relevant documentsThe final step to securing a loan is proving that you have all the relevant documents to back up your claims. Your bank needs to understand what you own, what you owe as well as what you earn and spend. They will ask you for the following, depending on the type of loan you apply for:
Kruger suggests the following tips to build a good credit record and keep the payments affordable:
"Banks have to comply with the National Credit Regulator rules of responsible lending; if you get a loan that you can't afford to repay, it may result in you being over-indebted. If you manage your debt responsibly, you will always have access to credit when you need it the most," concludes Kruger. |