How to Get a Home Loan If You’re Blacklisted
Now that you’re blacklisted, you’ll most likely have trouble applying for a home loan. however, being blacklisted is not the end of the world. There are still ways to obtain a home loan for your property and that’s what you’ll learn in this article.
What Happens When You’re Blacklisted?
Being blacklisted means you were unable to meet payment obligations to the point that you’re given a court judgment. If you see any of the following records on your report, you’re most likely considered blacklisted by major banks:
- Default listings
- Trace alerts
Check if all the items recorded on the report have been done under your name. Transactions that have been put there by mistake must be immediately reported to credit bureaus for correction. Otherwise, they’ll remain on your record and could be part of the reason you’ll get blacklisted.
Becoming blacklisted has several disadvantages that can persist for a long time. Aside from being unable to get any type of personal loan from traditional lenders, you may have trouble dealing with situations that involve credit checks.
For instance, you’ll find schools that might reject your child’s enrolment if they knew that you have a history of not being able to pay on time. You might also find it difficult to look for a place to rent if the landlord sees your credit history. Even employers might think twice about hiring you because your credit report says that you’re unable to handle money properly.
Getting blacklisted has numerous consequences that affect both you and those around you. It creates a domino effect that can negatively impact your family, work, lifestyle, and future financial options.
You’ll remain blacklisted so long as your outstanding debts have not been fully repaid. And even if you’ve cleared all your debts, the history of having been blacklisted will remain in your credit history for up to five years. Lenders will see your borrowing history and be very cautious about giving you a loan even if you’ve already been cleared from debts.
Where to Get a Home Loan for Blacklisted
Traditional lenders like banks and large financial institutions will avoid giving you a home loan because of your current status. It’s pointless to convince them to lend you money by promising you’ll pay back this time because your credit record says otherwise.
The only option you have is to look for smaller, alternative lenders in South Africa that offer blacklisted home loans. Many of them can be found online and have a faster application process compared to traditional banks. Usually, you’ll only have to provide them with proof of your identification, proof of residence, and three months bank statements to show your income.
Alternative lenders, like traditional lending institutions, offer both secured and unsecured loans for blacklisted individuals.
The biggest downside in taking blacklisted home loans is the ridiculously high-interest rates associated with the product. Rates can reach as high as 28% annually which is almost four times the usual rate offered by banks. This ludicrous interest rate is to be expected considering you’re a high-risk individual who’s prone to being unable to pay on time.
Many loan sharks exploit blacklisted individuals by feeding on the latter’s desperation to borrow money. These loan sharks charge even higher interest rates than alternative lenders in exchange for the convenience of not going through standard verification processes.
Loan sharks and bogus lenders won’t require you to submit several documents and undergo rigorous background checking to get the money. You’ll probably be offered to sign a contract stating the payment date, the monthly repayment obligations, and the interest rate for the loan.
To avoid dealing with loan sharks or bogus lenders, make sure they’re registered under the National Credit Regulator to operate as a lender. Knowing that they’re running a legitimate business is your insurance against illegal and abusive lenders.
What to Do to Get Out of the Blacklist
Some scammers will tell you that you’re blacklisted even when you’re not. The best way to verify this is by getting your credit report. You can get a copy of it from the major credit bureaus for free once a year.
If you’ve confirmed that being blacklisted is all your doing, you don’t have any choice but to get back up and clear your credit history the proper way. Here are the steps you should take to get out of the blacklist.
- Look for fraudulent records
It’s not unusual to see errors in your credit report. However, many South Africans simply disregard them because they feel like these won’t affect their rating.
Look for fraudulent records and clear them from your reports. Lodge a dispute to the credit bureau in case you find transactions that you didn’t authorize in your credit records.
- Settle all your debts
Settle all your debt obligations as quickly as you can to get out of the blacklist. Pay any credit card balance, outstanding bills, and all debts you have from all creditors. You can always look at a debt consolidation loan to consolidate all existing debts to assist with the loan repayment.
- Improve your credit score
Your credit history is the basis of lenders in assessing your risk level when borrowing money. From being blacklisted, you can slowly recover your bad credit record to an acceptable rating that will make it easier for you to avail of debt instruments.
Avoid getting more debt when you’re still repaying existing loans. Repay all your monthly dues without fail and it will show up on your credit score. In time, you’ll be able to wipe off the bad credit status. It will take years to do this, but with good debt management, you’ll slowly be able to get back up again and start with a clean slate.
Preventing yourself from getting over-indebted is the best strategy to avoid being blacklisted. As much as possible, avoid borrowing money that you can’t repay on time. Build up an emergency fund that you can use for unexpected expenses, so you don’t have to borrow money when the time comes. When you do qualify for a home loan bond, it’s important to make sure you check your affordability and that you have access to funds to always make the repayment bills on time.
But in case you become blacklisted and you badly need a loan, be careful in accepting blacklisted home loans. These loans have very high-interest rates and unfavorable terms that will even make it harder for you to recover your good credit standing.