It's never easy getting access to credit when you have a low credit score.
But it doesn't mean you cannot qualify for a personal loan. There are over 8250 registered lenders in South Africa, with different loan qualification criteria that you can qualify for.
So today, I want to help you understand and show you how to qualify for personal loans.
Let's dive right in.
What is a Low Credit Score?
In the credit world, you'll have a low credit score for two reasons:
- No credit history
- Bad credit history
A credit score rating is a 3-digit number between 0 (Very poor) and 705 (Excellent).
The score is calculated by credit bureaus in South Africa to assist lenders with decision-making for offering loans.
So you'll have a low credit score if you've never had credit before, maybe a simple store account and small cash loan.
And you'll have bad credit history when you've missed out or stopped paying for your debt. Popular known as being blacklisted, you'll never qualify for affordable personal loans in the near future.
Getting The Loan
There are two types of loans for bad credit offered by certain lenders in South Africa:
With unsecured personal loans, you'll qualify for the loan at a higher interest rate.
This is because you currently have a low credit score, for lenders to trust you'll pay back the loan in record time.
So they'll charge you higher interest, to capitalize on the risk taken to offer you a loan without a credit history.
Try these lenders for loans with low score:
You'll qualify for the loan based on the asset or collateral provided to secure the loan.
This type of loan is safer for the lender and you (the borrower) in ensuring the loan is fully paid and lower risk taken.
And this will not affect your credit score negatively, because the loan will be paid back in full, either way.
If you cannot make the payments, the lender will sell your asset to recover the loan - it's that simple.
Try these lenders:
What is Required to Qualify?
The lender will always look at your affordability, before deciding to offer you a loan.
Considering you have a low credit score, lenders will assess your application closely, to ensure you'll be able to afford the loan.
You'll need to provide the following documentation:
- A valid South Africa ID
- Latest payslips
- Recent banking statements - which your salary is paid
- Proof of residential address
Lenders will decide to offer you a loan based on this information and of course, your credit history.