Personal Loans for Bad Credit : Find Loans with a Simple Application Process

Are you looking for a personal loan despite having a bad credit score? Are you looking for a simpler application process? You can read through our guide about personal loan offers.

A personal loan is defined as money borrowed by an individual to use for several purposes. You might have a wedding coming up, need to renovate a home, or consolidate a loan but lack enough funds to do these. In such a case, you may need a personal loan which is usually offered by the bank, online lenders, or even credit unions. Like any loan offered by commercial lenders, personal loans are paid back with interest over an agreed period. Personal loans are either secured or unsecured. You will need collateral to borrow a secured personal loan, while unsecured personal loans do not require collateral.

Every lender has its terms regarding providing a personal loan from different interest rates, repayment terms, fees, borrowing limits, and collateral requirements for secured personal loans.

What is needed for approval of a personal loan in South Africa

While every lender across the country has terms regarding providing a personal loan, several things are commonly required before a lender considers providing you with a personal loan.

These are:

A good credit score; a credit score is rated between 300 and 850. An individual with a credit score between 300 and 579 is considered to have a low score. A credit score of 580 to 669 ranks as fair, while a score above 700 is considered a good score. A good credit score puts you at a high likelihood of getting a loan with favorable repayment terms.

A regular income; lenders like to provide loans to people who they know can pay. Employed people with a payslip have a higher likelihood of getting personal loans. Lenders, however, allow the unemployed to apply for personal loans as long as they can provide proof of income.

General requirements to get a personal loan

Before a lender can approve a personal loan, there are a few documents you are required to have when applying for a loan. These requirements differ from lender to lender, but the most common are;

Copy of ID; every lender across the country requires a clear copy of your South African ID.

Bank Statements; depending on your employment state, lenders may require that you produce up to three months or six months bank generated bank statements.

Proof of income; this can be provided in the form of a payslip for permanent employees, a letter of employment for workers on contract, pension remittance for retired employees, or a letter of drawings from an accountant in the case of an unemployed person in need of a personal loan.

THE CREDIT SCORE

A credit score is defined as a numerical value ranging from 300 - 850 assigned to an individual based on the analysis of their credit history to present their creditworthiness to lenders. Lenders use an individual’s credit score to determine whether they deserve a loan or not and what interest they should be charged.

The credit score is calculated from a formula based on an individual’s payment history, how much they are owed, how long their credit history is, their credit mix, and their new credit. These five form the credit history. A good credit history which usually translates to a good credit score, means an individual is diligent about paying back debt. Other information usually considered in an individual’s credit history includes defaults or court judgments against their name by financial institutions.

How the credit score affects the loan decision

The moment you apply for a loan, the lender first checks your credit score before deciding on whether they will approve the loan application or not. An individual’s credit score, therefore, affects the loan decision in terms of;

Qualification of a loan; those with a high credit score are more likely to qualify for a loan than those with a poor credit score because a high credit score increases the lenders’ confidence in the individual’s ability to pay back the loan they have applied for.

Interest rate; an individual with a good credit score is likely to get a better interest rate.

Credit limit; since credit scores are designed to show how much you are owed against your payment history, lenders usually use this to determine how much they are willing to lend you. A high credit score is likely to increase an individual’s credit limit since it shows they are disciplined in paying loans borrowed.

Options available when you have a poor credit score

As earlier stated, lenders look at your credit score to determine whether you are creditworthy. The credit report containing your credit score shows your behavior regarding borrowing, including how much you’ve borrowed, if you’ve paid it back, and whether it was done on time. Having a bad or poor credit score means that you are struggling or have struggled to pay back your debts. You are likely to get a bad credit score when you don’t make your monthly repayments on time, miss repayments, declare bankruptcy, or have a court judgment against your name. When you have a bad credit record, you can;

Take a loan for bad credit; some lenders take a risk by offering personal loans to people with bad credit. The catch, however, is a higher interest rate. In this case, it is advisable to pay back this type of loan to avoid expensive interest rates.

Avoid multiple loans at a go;multiple loans could further damage your credit score, thus making it hard for you to be approved for loans you may need since you become a risky borrower.

Use a ‘soft inquiry to check for eligibility from lenders; every credit application leaves a footprint on your credit report, further damaging your credit score. A soft inquiry helps you check if you can get a loan before applying without damaging your credit score.

PERSONAL LOAN PROVIDERS IN SOUTH AFRICA

There are countless personal loan providers across Africa. Quite a number also offers consolidation loans for bad credit, low-interest loans, and online applications. The advantage with online applications is that they get a quick response and some with even same-day cash loans. I have outlined some of these loan providers.

African Bank

African Bank offers an online platform that allows you to apply for personal loans. You can borrow from a minimum of R2000 to a maximum of R250000 with fixed payments over 7 to 72 months. The loans come with low-interest rates ranging from 15% to 27.5%.

The bank also provides consolidation loans by offering you a chance to combine up to five loans into a single consolidation of up to R250000 and get one lower repayment

ABSA

One can apply for a personal loan from the ABSA bank from their website. They offer loans up to R350000 with their payment terms over 12 to 84 months. Their loans attract an interest of up to 17.5%. ABSA also has a credit protection plan which covers you in the event of a death, critical illness, disability, or retrenchment.

The bank also offers a consolidated loan facility which can help you save with a low-interest rate.

FNB

FNB provides personalized credit of up to R300000. This personal loan attracts a tailor fixed interest rate from as loan as 12.75% with fixed repayments to which can be made in up to 60 months. Early loan repayment does not attract any penalty, and regular payment earns you a payment break every January. The bank also offers a consolidation plan to ease loan payment.

NEDBANK

You can apply for personal loans ranging from R2000 to R30000 from the Nedbank website. The loans have flexible repayment periods between 6 to 72 months attracting interest rates as low as 24.50%. They also offer loan consolidation services.

Standard Bank

In Standard bank, you can apply for a personal loan as low as R3000 to as high as R300000, which attracts a personalized interest rate of up to 24.5%. The loan repayment terms range from 12 to 72 months.

CONCLUSION

Given the information provided, the best personal loan lender, in my opinion, would be ABSA since its ceiling interest rate is lower than most lenders. ABSA also provides a longer repayment period of up to 84 months which means you can spread your repayment installments in comfortable amounts across the payment period.