It also suited the banks as foreclosing could have had a serious impact on the property market and ultimately their mortgage books. According to the National Credit Regulator (NCR)  , about 30 000 homeowners are in debt counseling, and about 197 000 South Africans’ home loans are in arrears by more than 30 days.

As these  private agreements aren’t regulated by the NCR the onus is on the client to ensure that the arrangement is above board and that the lender does not unilaterally alter the terms and conditions of the loan.

Banks typically change you profile when you enter into an arrangement and suddenly you go from being a sub-prime client to a client with a much higher interest rate. Always make sure that in terms of the agreement the banks is permitted to alter you interest rate unilaterally – in many instances they aren’t and can end up overcharging you thousands of Rands on your mortgage.

The number of clients entering these arrangements is quite large , according to  Standard Bank  it enters on average 400 such agreements per month , while  FNB says it has done more than 1 000 of them and Nedbank 10 000. Absa was unable to substantiate with any figures.

Its standard practice for the banks to charge you prime while the arrangement is in force , but once the arrangement period is over they should change you back to the interest rate prior to the debt arrangement. If this doesn’t happen you should check your loan agreement , if they are acting contrary to the terms of your agreement take it up with the bank and get the interest rate changed to the agreed rate. If you don’t get any satisfaction from your bank , you can always refer the matter to the Banking Ombudsman.

Over the period of the mortgage , paying to much interest can result in tens of thousands of Rands of over payment , the onus is always on the client to ensure that you aren’t getting ripped off.

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Governor Marcus cites cost push pressures being the primary cause for the breach making it easier not to increase rates. The Reserve Bank’s dual mandate of growth/jobs and inflation must have played a major role in keeping rates unchanged. The MPC are probably very aware of the high unemployment rate in South Africa , 25% , which is probably the highest unemployment rate in the world.

Factors that are likely to put pressure on South African inflation over the near future are the oil price and the Rand/Dollar exchange rate.  It seems that the period of rate cuts are over and the next moves in the Repo Rate will be higher. If you have a large level of debt on a variable rate , now might be a good time to consider fixing your interest rate.

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Here are some basic concepts to keep in mind when consolidating your debts.

Summarise All Your Debts

This will enable you to obtain a better understanding of your financial situation. It also facilitates easier management of your debt and payments. You should only include debts like car payments , credit cards , clothing accounts and mortgage payments.

What Interest Rate?

Find out what the interest rate is on each debt that you currently have. You will be amazed at how much the various contracts vary and how much interest you are paying in some cases.

Shop Around For Consolidation Loans

A good place to compare various debt consolidation offering is to conduct some online research. Various lenders have packages that differ substantially so you need to do your homework and make sure you are comparing apples with apples.

There are also many reputable online debt consolidation offers available online. Check out the offers available at various reputable websites.

Choosing The Right Debt Consolidation Loan

Once you have evaluated all the debt consolidation offers you need to select the loan that fits your circumstances. You need to take into account the term , interest rates as well as the capital amount when making your decisions.

Once you have selected the right offer , you need to complete the paperwork and provide the lender with all the supporting documentation. Online applications are very convenient and you can APPLY HERE.

Next week we will go over a practical case study where you can see how a debt consolidation loan can save you money over the long run and relieve some of the financial pressure you may be experiencing.

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Over the last 12 months there has been a definite shift in this trend. Both Standard Bank and Absa Bank recently reported that their own internal channels generate the bulk of their new mortgage loan business. Some banks , Absa and Nedbank have actively followed a strategy of cutting out the middleman. Absa has started a marketing campaign whereby they actively incentivise their direct channels. If you take out a new mortgage via your branch they will pay up to 0.35% of the mortgage value into your bank account plus provide a discount of 50% on conveyancing fees. They are also running a competition whereby three new customers stand the chance to win R50 000 – paid into their home loan accounts.

There are some instances where it may be beneficial to use the services of a qualified mortgage originator. If you have experienced credit problems then a good mortgage originator can help smooth the process. Another case is where you are self employed – using a good mortgage originator can  make the process somewhat easier.

However you should be wary of using a mortgage originator referred by the Estate Agent especially when you have a good relationship with your bank.

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You will still need to meet the credit criteria of the various institutions , but the days of making an appointment with your bank manager are long gone. In fact applying online provides you with several distinct advantages that you just don’t get if you were to approach your bank.

These are some of the advantages of applying for a personal loan online ;

• The most significant advantage is the convenience factor – you fill in an online form and fax off some details and usually receive an answer within 24 hours , without even leaving your home.
• Fast approval – although banks are geared to approve quickly the online process is set-up to reduce any delays in the application and approval process.
• Typically most online personal loan providers use the services of a few banks and lenders and are therefore able  to shop around for the best deal for you. In some cases the interest savings can be quite significant.
• Even if you don’t have a clear credit record many online providers will be able to assist you with a personal loan. In most cases the major banks will not be willing to take on these cases.

It may seem like the days of personalised banking are over where the bank manager actually knew you by name. Modern banking has become very impersonal and most banks despite what they say in their advertising only see you as a number and don’t really care about your personal situation.  Consumers are starting to take more control of their personal finances in this environment and using the services of online loans providers is an important step in taking charge. If you need a personal loan you can apply online – CLICK HERE.

What should you keep in mind when applying for a personal loan online ,

• Basically the same considerations that apply when applying at your local branch. The most important issue is can you afford the repayments.
• What is your current level of debt – all lenders will look at this.
• Consider all the options available – make use of the financial calculators available here . These can provide you with useful information on repayments and also allow you to test various scenarios and assumptions.

Making an informed decision using all the resources available online has made life significantly easier for consumers and prospective lenders.

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You are faced with unexpected medical expenses and your medical cover won’t cover all the cost. You should then look at taking out a personal loan to cover these emergency medical cost. Your health is too important to take chances and if your are short of cash then take a personal loan , but never take chances with your health.

Your are faced with rising educational expenses and just can’t pay these out of your monthly income. Taking out a personal loan in this case would be a viable option. Education is an investment that will pay off in the long run – don’t be afraid to finance education through a personal loan.

Your car needs repairs and you just don’t have enough resources to to cover the costs. Without transport you cannot function – unfortunately we don’t have reliable public transport in South Africa and a running vehicle is a necessity. Vehicle repairs can be quite steep especially when the warranty has expired – not many people can fund these costs out of their monthly budget and still make ends meet. Often taking out a personal loan is the only option available.

You have a number of small debts that you are paying off every month some of them at exorbitant rates of interest. If you can secure a personal loan at a lower cost it makes sense to consolidate all you debt via a personal loan. You will then only have one payment to make and the total payment will be lower than your previous repayments.

Life often presents you with emergency situations and often the only way you can deal with the problem is by applying for a personal loan. These can range from family emergencies or helping a friend in need.

These are some of the instances when it makes sense to apply for a personal loan to help you through a difficult situation. Never take out a personal loan to cover luxuries , day to day living expenses , deposit for a vehicle or to finance a vehicle.  If you need vehicle finance you should rather look at some of the tailor made packages provided by banks and vehicle finance companies.

When you do take out a personal loan , always try and settle the debt sooner especially if there are no early settlement penalties.

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Consider the following factors and identify any areas requiring improvement so that you too can buy your dream home,

1. Know how much you have and how much you owe. How much income are you receiving at present? Is there a chance that it would increase? What will be your financial situation several years from now?How much money do you owe to creditors? What are your monthly payments? Can you still afford to shell out more money after the bills are paid?

You’ll need a consistent source of income that can cover your mortgage and other expenses. Try to foresee possibilities that you’ll need to factor in: a new child, changes in the job, back-to-school plans and cash-flow five or several years from now. Be prepared to be in it for the long haul.

2. If your debts are well managed, then you can afford a home mortgage. The lender will approve your loan more quickly if he sees that your debt-to-income ratio is well within manageable range.

3. Decide which one you prefer: fixed, or variable. Paying a fixed rate is a more popular choice because it can protect you from surges in interests while paying the lowest rate possible for an agreed period of time may be lighter on your budget, but your mortgage payment can go up later.

5. Be prepared to pay a deposit Typically, it is about 10% of the total price. A house priced at R1 000 000 will require a down of R100 000. There are also loans with low or no-deposit requirements, but these mainly target first time buyers and end up costing your more in the long run. Since the credit crisis getting a mortgage without a deposit is virtually impossible.

6. You have enough money saved that’s equivalent to at least three months’ monthly income. This will help cover unexpected expenses that could affect your mortgage payments.

There is no fixed answer on the affordability of a home mortgage. It will all depend upon your income, debt, interest rate and other factors ( some beyond your control).

Finally, check out our Loanfinder’s user friendly mortgage calculators to help you determine how much mortgage loan you qualify for based on your current financial situation.

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This means that the prime interest rate will stay at 9% the lowest level since 1974. This is excellent news for consumers and persons with personal loans , mortgage loans and credit card debt. This is an excellent opportunity for debt holders to try and lower their debt repayments by consolidating all their debts. Click the banner below to find out how you can benefit from debt consolidation.

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One of the risks is the possibility that the balloon / residual payment can be higher that the market value of the vehicle at the end of the contract period.

The difference between a residual and a balloon payment contract relates to where the risk for the outstanding payment lies at the end of the finance agreement period.

Balloon Payment

A balloon payment is an inflated installment that falls due at the end of the credit agreement, it is also be referred to as a bullet payment.

The balloon amount is based on the projected market value of the vehicle and is influenced by the length of the credit agreement, i.e. (i.e.36, 48 or 60 months), and by the resale value of the vehicle being financed. The risk associated with a balloon payment is carried by the customer, you are liable for the full balloon payment in the final month of the contract and this forms part of the payment stream. Balloon payments can form part of any Installment Sale and Rental Agreement

Ideally you want trade in the vehicle and use the cash obtained to settle the balloon payment and still have enough cash left over to provide a deposit. Another option is to keep the vehicle and most financing institutions will allow you to finance the balloon payment.

Residual Value

Residual values are associated with rental agreements. The risk associated with a residual value payment is carried by the financial institution. Financial institutions typically would therefore place certain restrictions on the mileage of the vehicle and may impose penalties on high mileage users.

At the end of the rental period you return the vehicle to the finance company who have the responsibility of selling the vehicle and benefit from any profit or loss on the sale of the vehicle.

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• Have a stable steady income , you will need to provide proof of this in the form of a payslip or audited financial statements
• Qualify for the loan in terms of the banks affordability criteria and be able to afford the monthly mortgage payments
• Have a clean credit record , if you have any default judgments or listings the bank will turn down your mortgage application
• The bank may apply additional conditions at its discretion.

The different South African banks may apply different conditions when considering your mortgage application , but these are the core conditions that you should be able comply with in order to qualify for a mortgage loan.

Here are a few pointers and advice on ensuring that you make the best case when applying for a mortgage loan;

Stable and Steady Income

If you are employed and receive a payslip the banks will feel more comfortable in providing you with a mortgage loan. People that are self employed will need to provide the bank with a great deal more information to qualify for that mortgage loan. The bank will require that you provide them with your latest set of audited financial statements as well as 6 months bank statements – the bank wants to satisfy itself that you are able to generate an income to cover your mortgage payments. If your business is still new or not generating the desired level of income it would be prudent to hold off on your mortgage application until you and the business have built up more of a track record.

Banks Affordability Criteria

You have a steady income , but based on the banks affordability criteria you don’t qualify. You could always consider applying at another bank as the various South African Banks have varying affordability criteria , however this is only likely to work in marginal cases as essentially the banks consider the same facts.

You need to identify what the problem areas were in your application and to address these issues. Often applicants are declined because their debt levels are just too high and a significant portion of their income is used to service debt. The only advice here is to reduce your debt levels to acceptable levels before reapplying , you can do this by cutting your expenses and paying off more debt. Always pay off the most expensive debt first and work through your debts systematically. As you pay off more debt increase you repayments on other debt items until your debt levels become more manageable.

Another problem area causing your mortgage application to be declined is that your income is just too low to service the mortgage. Your options are to shop around for a more affordable property that you are able to finance. Another sensible approach is to save towards a bigger deposit making the property more affordable. You can also try increasing your income – tough in these economic times.

Clean Credit Record

This is where most people fall short with their mortgage applications. Before approaching your bank for a mortgage loan always check out your credit profile before applying. You can do this at the major Credit Bureaus , ITC Transunion and Experian – they may charge you for the credit report , but is well worth the expense.

If your credit record has a few blemishes you may need to clean it up before applying for a mortgage loan. Where you are listed as a slow payer by a creditor , you should get your payments up to date asap and conduct your account in a more responsible manner. Afterwords  approach the creditor and ask them to remove the slow payer status.

Where a creditor has obtained a default judgment against you the situation become more tricky. You will have to pay the debt in full and ask the creditor for a rescission of the default judgment. Approach the creditor before paying the outstanding amount , make them an offer to pay off the entire amount and costs in exchange for them having the judgment rescinded.

In cases where you have paid the entire debt , but you are still reflected on the credit bureau you should obtain a letter from the creditor stating that the debt has been paid in full. It is always best however to try and get the listings removed as it just makes the mortgage approval process easier.

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