How does it work?
From the lender’s point of view, the reasons why they prefer to give loans to permanently employed people are quite obvious. They give their own money and it’s reasonable to try to avoid any additional risks of losing it. Those having regular income are more likely to repay a loan.
But the number of lenders giving loans for self employed in South Africa increases pretty fast. For such category there are 2 types of personal loans:
Secured loans require an additional asset, which stands as an additional guarantee for the lender that the money would be paid back. If it doesn’t happen so – the lender has all the rights to take assets as compensation.
Unsecured loans are given without any additional security assets, but in this case, the limits of available sums are lower and interest rates are higher. In other words, the loaner can have less money to borrow and at the same time would have to repay more.
Let’s take a look at the main features of loans for self-employed with no proof of income in South Africa.
Speaking about an amount, one can get a sum between 2000 and 300000. The highest available sum depends first of all on the debtor’s credit history. As the debtor hasn’t got a permanent working place, credit history becomes a valuable source of information for lenders to realize how much a person can afford and how risky it is to accept a loan.
The payment terms are also different, as they lay in between half a year and 72 months. The pace to repay a loan depends on its amount and average monthly income.
The interest rates are mostly individual. The stakes depend on credit score: the better the previous credit profile is – the lower personal interest rates are.
In the majority of cases, the process of application is simple and straightforward. Nowadays, it is even possible to apply online, as all the information to make a decision can be sent via the Internet. So you don’t need to visit the office yourself. But after a positive decision was made, it can be required to visit the lender’s office to sign documents and to get money in cash.
Best places for loans in South Africa
After careful research, we created a shortlist of the best services, providing loans for self-employed persons in South Africa.
|Service name||Terms and conditions|
|Wonga||Short-term loans. The amount depends on credit score and previous experience of using the service. New customers may have up to 4000, already existing – twice more.|
|FNB||Loans for self-employed with fast payout. In case you match the requirements to qualify for the loan (mostly based on previous credit score) – you can easily get even up to 300.000|
|Absa||Mostly works with personal loans of small and average amounts. The required qualifying: bank statement, showing that you have a regular income of at least 1500 (no matter what the source is, the main requirement is legal and regular income, matching limit)|
|Capitec||Loans for owners of their own business. Such types of self-employed may count on amounts up to 250.000, according to previous credit scores. The disadvantage is that sole traders or freelancers can’t use this service to borrow money.|
|Standard Bank||Loans for self-employed. Borrowing money here requires current business financial statements or documents, describing personal assets that can match the sum to qualify for the loan.|
|Nedbank||Those self-employed, having a monthly income, starting from 3500 (with a possibility to prove it documental) may count on loans, ranging from 2000 to 300.000, according to the previous credit profile.|
Available types of loans
Self-employers in South Africa may get 4 types of loans.
These are loans for any personal needs, sometimes you may even not be asked about aim. Self-employed people may get either secured or unsecured loans (we used to mention these types earlier). Applying for self employed loans in South Africa in the majority of cases requires checking a credit profile to make sure that a person is trustworthy.
Great idea for those, looking forward to buying their own house, but don’t have enough funds. Even if you don’t have a permanent job but work as self-employed or own a small business – you can apply for a home loan to make your dreams come true.
Here there are loans, available online. Just fill in the applying form at the site, send copies of required documents to the lender company, and wait for confirmation.
Buy a car even if you have only a part of the required sum and work as self-employed. The company would pay the remaining part, but the car would be used as a payback guarantee until you would totally repay.
Requirements to get a loan
Making a decision whether to approve or decline a loan is just up to the lender. The choice becomes obvious as the candidate shows evidence that he can be trusted to repay the loan. The more proofs would be given – the more chances for a positive decision.
But as you send your application for a loan, it’s better to make sure that you match basic requirements, to increase the chances. For personal loans they are:
- South African citizenship and valid ID card.
- Possession of a valid bank account in any bank of South Africa, where income is sent.
- Bank statement, showing the amount of income, matching minimal limit.
- Any document to prove a place of residence, like a utility bill with the address.
Also, self-employed may count on other types of loans, like home or vehicle financing. Sets of requirements are different in that case. The former requires:
- A full declaration, describing all the assets and finances that are in possession.
- Notice of Assessment (form IT34).
- Statement, describing monthly income (it is most favorable to have it from the auditor).
- Amount of money to make the first deposit, according to the debt terms and conditions.
For those, applying for vehicle finance loans, it is required to:
- Have a sum of money for the first deposit.
- Have a valid driver’s license (given in South Africa).
All the information from the documents below is used by lenders only in terms of identifying whether self-employed people are able to pay the loan back and to find out the amount of money which would be comfortable to pay monthly, according to current financial status.
Mostly, the application process for employed and self-employed is pretty much the same. The only significant difference is that in the latter case it would take a little bit longer to verify whether you are a trustworthy person to loan money. It is reasonable because the company should study everything carefully, as risks are higher than in the case of loans for permanent employees. The company must be ensured that you can afford to make all the required monthly pays without unbearable spending for your budget.
Ways to improve chances
The first piece of advice is to try to keep a good credit score. This means that you should clearly realize your current financial situation and be clearly sure that you can afford to make monthly payments. As only you have problems with repaying – in most cases it means that you can forget about chances to get new loans. Credit history saves all the information about previous loans and more likely any lender would check it as you apply for a new loan.
Save up money for a deposit. If you apply for a home or vehicle loan, you won’t get it until you have enough money to make a first deposit. Make sure to save up the required sum.
Check all the required documents. Save your time by carefully checking the list of all required papers and documents. Each company may have its own terms and conditions for applicants. Make sure to get all the proofs before applying for a loan.
Don’t hesitate to get professional assistance. Hire a specialist: accountant or professional auditor who would guide you through the whole procedure. It will save a lot of time, especially if you have never done anything of the kind earlier. Professional assistance is the way to increase chances for a positive decision. What’s more – now it’s possible to find great specialists with quality service at an affordable price.
Benefits of loans for self employed South Africa
Loaned money can be used in tons of ways. Personal loans work well to cover urgent needs, whether it takes personal life or something concerning business matters. Money can be used as a starting capital for something new, or as means to develop your existing business.