Loans for Bad Credit Score for South Africa

Bad Credit Loans in South Africa

A lot of South Africans have a bad credit record, and the worst part is, they don’t know what to do to recover from it. To get your score up and obtain a positive rating, you can choose to get bad credit loans in South Africa.

What is a Bad Credit?

A bad credit score is what you get for consistently breaking the terms in repaying your loans. Missing loan payments, managing too many debts at one time, getting a court judgment, and applying aggressively for a loan are some of the factors that will get you a bad credit score.

Incurring a bad credit makes it harder for you to apply for a loan in the future. Banks will reject your request and you’ll have limited options even if you urgently need a loan. Still, there are a number of creditors offering bad credit loans in South Africa that can help you get back on your feet.

How are Credit Scores Determined?

Credit scores are calculated using several factors that define your ability to manage your finances. This includes the status of your bills, the debts you have, your spending patterns, and your credit performance relative to other active credit customers.

Your credit report will contain a handful of information aside from your credit score. It will also include a summary of your financial profile and accounts you’re holding.

Different credit bureaus have varying ways of computing credit scores. Usually, they put weight on your employment status and other relevant information they can get regarding your finances.

Transactions with banks and other financial institutions can help build your financial history. But what affects your credit history the most is how much you’ve loaned and the way you repaid it. The length of time you’ve been maintaining a credit line open also affects your credit score.

Credit Scores that Indicate Bad Credit

According to TransUnion, consumers are given a grade between 0 and 999 to determine their creditworthiness. The higher your score, the better.

  • Excellent: 767 and above
  • Good: 681 to 766
  • Favourable: 614 to 680
  • Average: 583 to 613
  • Below Average: 527 to 582
  • Unfavourable: 487 to 526
  • Poor: 486 and below

People with credit scores ranging from Poor to Favourable are considered high-risk customers. This means they pose a higher chance of not paying the loan on time. A good credit score lies between the Good to Excellent range as they’re deemed to be more responsible in handling debts. The higher your credit score is, the better since you’ll get lower interest rates as you become a more trustworthy debtor. If you want to start building up a good credit scores, follow the steps.

What is a Bad Credit Personal Loan?

A bad credit loan in South Africa is a type of personal loan offered to people with low credit score. These loans are specially offered to individuals with credit scores lower than 500.

Creditors offering loans to people with bad credit usually require no credit check on applicants. However, these loans for people with low credit score and blacklisted by credit bureaus have stricter conditions and usually have higher interest rates.

How Do Bad Credit Personal Loan in South Africa Work?

It can be very difficult to get bad credit loans in South Africa. You still have to go through the usual loan application process, but this time, you’ll have to comply with stricter rules since you carry a bad credit score with you.

The loans offered to those with low credit score and blacklisted individuals usually have shorter repayment terms and higher rates because lenders have tagged you as a high-risk customer. Don’t lose hope as there are still a good number of lenders who offer emergency loans even to those with bad credit in South Africa.

Applying for a Personal Loan When You Have a Low Credit Score and You’re Blacklisted

Loans for those with poor affordability are offered by micro-lenders across South Africa. However, these lenders will look for proof that you can repay the loan on time. You must be permanently employed and are receiving a monthly salary of a certain amount to have a fighting chance of getting approved.

Since it may be difficult to get unsecured loans when you have a low credit score and you’re blacklisted, you may want to consider getting a secured loan instead. This will lower your risk of getting rejected as lenders have a collateral they can use in case you fail to repay your debts.

How to Get Business Loans with Bad Credit in South Africa?

Getting a start-up business loan when you have bad credit rating can be incredibly challenging. Banks will either reject your loan request or offer one with ridiculously high interest rates and fees.

The good news is that there are alternative lenders who can provide unsecured business loans even to those with bad credit rating. With their help, you can gradually restore your rating and get a good credit score.

The government can also lend a hand in providing start-up business loans even to those who have a bad credit record through the Small Enterprise Finance Agency (SEFA). Similar to the requirement of banks, you also have to provide them with a document detailing why you have a bad credit score.

They have a list of the criteria they’re looking for in providing bad credit loans for businesses in South Africa. Read them first before submitting your loan application.

Although most banks don’t offer bad credit loans in South Africa, there’s still one that can help you get your business running. ABSA offers bad credit loans to entrepreneurs in South Africa. Their Development Credit Fund targets SMEs and start-ups with bad credit scores who are having trouble with their finances.

ABSA will require you to justify your case for getting a poor credit record when you apply for a business loan. Their start-up business loans for those with bad credit must be guaranteed with a collateral as a safeguard against high-risk customers.

Top Providers of Loans for Bad Credit Score in South Africa