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How to Get a Loan Under Debt Review In South Africa building loan

By Oluchukwu Ikemefuna

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Finding yourself under debt review and in need of a loan urgently can be a daunting situation, especially when faced with the desire to secure essential financing. In South Africa, where financial stability is paramount, navigating this scenario requires strategic planning and informed decision-making.

Despite the challenges, there are avenues available to individuals in this predicament, including accessing building loans.

This article aims to provide guidance and practical steps for those seeking to obtain a building loan while under debt review in South Africa.

By understanding the process and exploring viable options, individuals can empower themselves to achieve their homeownership goals despite their financial circumstances.

What is Debt Review?

Debt review is a legal process in South Africa designed to assist individuals who are struggling with debt repayments. It aims to provide relief by restructuring debt and creating a manageable repayment plan. While under debt review, individuals are protected from legal action by creditors, providing a crucial breathing space to regain financial stability.

What is a Loan Under Debt Review?

A loan under debt review refers to a financial arrangement where an individual who is currently undergoing debt review obtains additional credit or financing. When someone is under debt review, they work with a debt counselor to restructure their debts and create a manageable repayment plan. 

However, despite being under debt review, individuals may still need access to credit for various reasons, such as purchasing a home or financing a business venture. In such cases, they may apply for a loan under debt review. 

These loans are typically subject to stricter criteria and may come with higher interest rates, as lenders perceive individuals under debt review to be higher risk borrowers. Nonetheless, obtaining a loan under debt review is not impossible, and with careful planning and diligence, individuals can secure the financing they need while working towards financial stability.

Read also: Understanding Funding Terms: What do equity, debt, and hybrid financing mean?

The National Credit Act thought about getting a loan under debt review

Getting a loan while you’re under debt review is not possible. When you’re in debt review, your credit history gets marked as problematic, making it tough for responsible lenders to approve your loan. They need to check your credit history before they give you a loan, and if they see you’re under debt review, they’ll likely say no.

According to the National Credit Act, if a bank or lender approves a loan for someone under debt review, it’s considered reckless lending. So, until you’re done with the debt review process and not struggling with too much debt, you can’t get another loan.

The National Credit Act oversees the debt review process, making sure it’s fair. If you’re under debt review, you’re not allowed to apply for more loans. Legitimate lenders won’t accept your application, leaving you vulnerable to loan sharks.

Loan sharks don’t follow the rules and aren’t regulated, unlike legit lenders. They offer high-interest loans that can trap you in a cycle of debt. Some people under debt review may feel tempted to borrow from them, but it’s risky and could make your financial situation worse.

Being under debt review means changing your spending habits and living within your means. It’s hard, and some people might be tempted to rush out of debt review and back into using credit. But borrowing from loan sharks can ruin your finances in the long run. It’s important to stick to the debt review process and avoid risky loans.

Read also: Payday Loan: How to Apply and Access 

What should I be mindful of in this debt review process?

Some people especially loan sharks might come to you with big promises to solve your debt problems quickly. They might say they can get you credit if you leave your debt review.

But be careful, these salespeople are usually just after their own profit and might not care about your best interests. If you follow their advice, you could end up with even more debt that’s harder to get out of.

Another group to watch out for are collection agents working for credit providers. They might offer you a deal to pay less each month, but this could end up costing you more in the long run. They might even suggest you leave your debt review to get a supposedly better deal, but that’s not true until the review is finished.

The problem with these offers is they can drag out the time it takes to clear your debt, making it easier to fall back into bad habits. Plus, they might not tell you about extra fees or high interest rates, which can make your debt even worse.

If an agent doesn’t give you a written offer, it’s risky to trust them with your finances. You could end up losing your protection rights and be left vulnerable to creditors.

Always check with your debt counsellor before making any decisions, to make sure you’re still protected under the debt review process.

Read also:Payday Loan: How to Apply and Access 

Is leaving debt review for a single creditor worth the risk?

Switching from debt review to a deal with just one creditor is not smart, says Debt Free Magazine. If you bail out, you lose all the perks of being in debt review. Plus, other creditors could come after you legally because you’re no longer shielded by debt review.

While you’re under debt review, you can’t get a loan anyway. Your credit stays flagged until you finish the review, and just telling your counselor you’re leaving doesn’t change that. You’ll get a clearance certificate only when you’re no longer over-indebted and all payments are on track.

People who bail early or miss payments can’t get new credit until their credit status is sorted out after all debts are paid.

If you take the shortcut offered by a smooth-talking salesperson, you lose all the progress and benefits of debt review.

Plus, you’re open to legal action from creditors without the protection of debt review. If you want to rejoin debt review later, counselors might see you as unreliable.

The responsible move is to finish your debt review and stick to the plan patiently. Once you’re out, you can get more credit and hopefully learn from your mistakes.

If you’re struggling during the review, talk to your counselor for help managing your budget better, like finding extra income or asking for a raise. This process takes time because it’s meant to change your spending habits.

Keep tabs on your debt review progress to know when you might finish, and watch out for shady salespeople and lenders who aren’t registered and don’t have your best interests at heart.

Read also: What is Debicheck and Does Debicheck Mean Loan is Approved in South Africa?

What to do when you are under debt review and need a loan in South Africa.

If you’re struggling with debt, getting more loans isn’t the best way out. Instead, concentrate on the debt review plan and follow it closely. 

Think of it like climbing a hill – one step at a time. Stick to your payment plan and spend your money wisely by cutting out things you don’t really need.

 Every bit of money matters. It’s also helpful to learn about managing money, investing, and saving. Knowing these things gives you more control over your finances.

However, some other lenders, like online ones or credit unions, might be willing to lend to you.

Even though it’s challenging, there are some lenders who might consider giving you a loan if you’re undergoing debt review.

Here are some options apart from traditional banks:

1. Peer-to-Peer Networks

2. Micro-loan Organizations

You can apply for a loan while under debt review, but it’s essential to finish the review process first to avoid reckless lending charges. Missing payments could lower your credit score, making it harder to pay off debts later on.

Some people feel embarrassed to seek financial help, but there are ways to get assistance without revealing your identity, like going through debt review. A debt counsellor helps you create a repayment plan based on what you can afford, and you make payments to the debt review organization, not directly to creditors.

While debt review keeps you from dealing with creditors directly, there are downsides. You can’t negotiate with creditors during the review, and the review organization can’t guarantee you’ll get more funds. So, if you want to keep paying down your debt, you’ll need to find another source of funding.

Types of loan you can get regardless of being under Debt Review.

If you’re under debt review in South Africa and need some extra cash, there are different types of loans you can consider regardless of the rule.They are:

1.Cash Loans:

These are loans you can apply for to get money quickly. They can help you cover unexpected expenses or make big purchases. Banks, credit unions, and online lenders offer them. It’s important to compare rates and fees from different lenders to find the best deal.

2. Online Loans: 

You can also apply for loans online. Online lenders offer various options like unsecured loans, payday loans, and personal loans. Researching lenders before applying is crucial. Read reviews, check their website, and ask questions to make an informed decision.

3. Short-term Loans: 

If you need money but don’t want a long repayment period, short-term loans might be for you. They’re smaller amounts of money that you have to pay back in a few months. 

It’s important to read the terms and choose a lender with fair rates and fees. Planning your budget carefully can help you avoid getting into more debt.

4. Payday Loans: 

These are small, expensive loans that you have to pay back quickly. They can give you immediate cash, but they come with high costs and the risk of more debt. Before getting a payday loan, compare rates and fees from different lenders. Make sure you have a plan to pay it back and improve your financial situation.

5. Unsecured Loans: 

If you don’t have assets to use as collateral, unsecured loans might be an option. They don’t require any assets as security. Compare rates and fees from different lenders to find the best option.

6. Personal Loans: 

Personal loans can be used for various purposes like debt consolidation or home renovations. They don’t require collateral. Before applying, compare rates and costs from different lenders. Create a budget and plan how you’ll use the money wisely to avoid getting stuck in a cycle of debt.

Read also: How to Get Urgent Cash Loan Without Salary Slip in South Africa

What are the Disadvantages of getting a loan under debt review in South Africa?

When you’re in debt review in South Africa, it’s against the law to get a loan. A court order shields you from creditors, so they can’t take legal action against you. Getting a new loan breaks this protection and can lead to legal trouble.

Lenders are cautious about lending to people under debt review because they understand the dangers. Think of it like a leaky boat: adding more debt when it’s already sinking won’t help. Applying for a loan means they check your credit, which can hurt your credit score. A lower score makes it harder to borrow money in the future.

Despite being against the law, some organizations and people still give loans to folks who are already being reviewed for their debts. But, it’s crucial to understand that this is a terrible idea with serious results.

Going against the court’s orders can get you into legal trouble, possibly ending up in a courtroom battle you definitely want to avoid. Plus, these loans come with sky-high interest rates, making it really hard to pay them back. Basically, the lenders are like hungry lions hunting their prey – they see desperate borrowers as easy targets.

What’s more, borrowing more money while already in debt review just makes the hole deeper. It doesn’t fix the problem; it just delays facing it. This can lead to a lot of stress, anxiety, and sleepless nights – not a pleasant experience for anyone. It’s important to remember that getting a loan while under debt review won’t solve your financial problems.

FAQs

Can I get a building loan while under debt review in South Africa?

Yes, it is possible to secure a building loan while under debt review in South Africa. However, it may require additional effort and careful planning to find a lender willing to approve the loan.

Will being under debt review affect my chances of getting a building loan?

Being under debt review can impact your chances of getting a building loan as lenders may perceive you as a higher risk borrower. 

How can I improve my credit score while under debt review?

Improving your credit score while under debt review involves making timely payments on existing debts, avoiding new credit applications, and reducing outstanding balances. 

What documents do I need to provide when applying for a building loan under debt review?

You will need to provide documentation such as proof of income, employment history, bank statements, and a detailed budget outlining your income and expenses. 

Are there lenders that specialize in providing loans to individuals under debt review?

Yes, there are lenders in South Africa that specialize in providing loans to individuals under debt review. 

Can I negotiate the terms of a building loan while under debt review?

Yes, you can negotiate the terms of a building loan while under debt review. Review the terms and conditions offered by lenders carefully and don’t hesitate to negotiate for more favorable terms, such as lower interest rates or longer repayment periods. 

How much deposit do I need to secure a building loan under debt review?

The amount of deposit required to secure a building loan under debt review varies depending on the lender and your financial situation. Aim to save at least 10-20% of the property’s purchase price as a deposit. 

Is it advisable to seek professional advice when applying for a building loan under debt review?

Yes, it is advisable to seek professional advice when applying for a building loan under debt review. 

Conclusion

Securing a building loan under debt review in South Africa requires careful planning, perseverance, and resourcefulness. By assessing your financial situation, improving your creditworthiness, and exploring alternative lending options, you can increase your chances of obtaining the financing you need to achieve your homeownership goals.

If you found this piece useful, kindly drop a nice comment. Also visit and follow us on X @SiliconAfriTech for access to other useful contents.

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Blessing Ukibe
Blessing Ukibe

Medical Student at Nnamdi Azikiwe University|Tech content expert at Silicon Africa Technology|Lover of fun books and fun fun ☺️

Articles: 125

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