We explore the "eligibility requirements" for personal loans in this article, along with what you can do to improve your chances of approval for a personal loan in South Africa.
There may be a variety of reasons why all of us need to borrow money at some point, which may vary from large purchases and emergencies for which we cannot afford to pay cash to debt consolidation. When the time arises, personal loans are often a good option. The main reason is that they are paid back with interest in monthly instalments over a period of up to several years, which can go a long way towards keeping your cash flow intact. However, because personal loans are technically ”unsecured” loans, the eligibility criteria are generally stricter.
By “unsecured loans” we mean loans that are not backed by collateral such as property or business assets, so they come at a much higher risk to the bank or lending institution. On the “upside”, though, you can usually borrow much larger amounts with a personal loan than with many other types of unsecured loans. In this article, we look at what the “eligibility criteria” for personal loans entail, what you can do to increase your chances of getting a personal loan in South Africa, and what to look out for when you choose a lending institution to borrow from.
How to apply for a personal loan in SA
Here are a few things you can do upfront to decrease unnecessary back-and-forths when you apply for a personal loan.
Check whether you meet the criteria:
Have a look at the lender’s eligibility criteria first, and make sure you will be able to meet all their requirements fully. You can do so by downloading the application form, or by taking a few minutes to complete an online application.
Get your paperwork ready:
Prepare all the documents you’ll need to attach to your loan application, which will be a valid South African ID, your latest payslip, valid proof of residence, and three months’ bank statements, at a minimum.
Calculate what you need upfront:
An unaffordable loan isn’t in your interest, and it’s unappealing to lenders. Check the minimum you need to apply for and make sure you’ll be able to afford the monthly repayments without tumbling into further debt. Click here for a rough estimation of what to expect.
Consider offering extra security:
If it’s clear that you don’t meet all the eligibility criteria yet, consider offering up collateral as security, or ask a relative or friend with a good credit score or higher income to co-sign the loan application with you.
Don't apply for too many loans:
Lenders regard applying for personal loans left, right, and centre as risky behaviour, and they will be able to pick up on this via the number of hard inquiries made on your credit report. Don’t apply for too many loans, and don’t apply too frequently.
Get ready to disclose all your income:
Being able to prove your income is not only key to verifying how much you can borrow, but also to show that you can afford to pay the loan back. Add up what you earn from all your various sources of income and be sure to have proof of this.
3 tips to improve your chances of getting your personal loan approved
When you apply for a personal loan, as with most things in life when you get the basics right, you will have a strong foundation for success. Following these quick tips all year round will boost your chances of getting your personal loan approved, as and when you need it.
1. Check what you earn versus what you owe:
Constantly check your ‘fixed obligations to income’ (or FOIR) ratio. Ideally, your FOIR should be between 40% and 50%, meaning that your total monthly expenses should not be more than 50% of your income.
2. Keep your address up to date:
When your address changes, make sure that it is updated on all of your financial accounts, as any discrepancies in details can raise a red flag for lenders.
3. Check and improve your annual credit report:
Everyone in SA has a credit report that reflects their credit status and credit score, which in turn determines your creditworthiness. Check your credit report every year, so you can improve it. Check your credit score for free.
Quick and easy ways to get a personal loan
RCS is a leading lending institution which is trusted by South Africans for seamless access to personal loans of between R2,000 and R250,000, with fast, paperless application processes, and decisions made within seconds. Check out the loan features and apply now.
