Absa increases stake in Blue Financial
South Africa's biggest retail
bank, Absa, has increased its stake in Blue Financial Services to 21%,
the micro-financier said on Tuesday.
Blue said it had also concluded a bridging agreement worth R120-million with Absa, to help grow its loan book.
Absa, which is now Blue's second-largest shareholder, bought a 16% stake in the firm in January. -- Reuters
Personal Loan from FNB
FNB Personal Loans offer you loans from R2 000 or more, depending on your financial profile, with flexible repayment periods from 6 to 60 months. Both FNB and non-FNB customers can qualify, and repayments are made by monthly debit order.
A personal loan is a helpful tool when you require a cash boost for a set period of time, with a well designed plan of paying the funds back. In this way you can use the loan to better yourself, your business or an aspect of your life while still ensuring your future financial success.
- We will deposit the money directly into your income bank account
- Your repayment will remain fixed over the period of the loan, even if interest rates go up
- A value added Customer Protection Plan is also available, which covers you in the event of retrenchment, death and disability
- Interest rates are based on an assessment of each applicants credit risk and that interest rate differ
National credit act nudges credit market in the right direction
The advent of the National Credit Act (NCA) has had a profound impact
on the credit market. This became evident in the outcome of research
commissioned by the National Credit Regulator (NCR) on the impact of
the NCA on the granting of consumer credit, with particular emphasis on
pricing and access.
Gabriel Davel, CEO of the NCR, comments that the research shows that
access to credit has improved in both numbers and book value since 2002
when the number of active accounts was 20 million. This survey has
revealed that the total has grown to about R32 million accounts by end
of June 2008.
The research also revealed that one of the areas in which the NCA has
had the most pronounced impact on pricing is in relation to what were
previously called micro loans.
"Prior to the NCA, these were governed by an exemption to the Usury
Act, which left the pricing of all micro loans (defined as loans up to
a value of R10 000 for a term of up to 36 months), uncapped. The study
indicates that the average price of a R1 000 one-month loan has
decreased significantly between 2002 and 2008. The range in pricing has
also narrowed dramatically" said Dr Hawkins of Feasibility who was
responsible for the study.
Davel notes that an important factor is that the consumers now have
access to a greater range of alternatives. The NCA permitted a change
in the credit market and consumers who may previously only have had
access to a micro loan, probably now also have the option of a credit
card or personal loan.
Obviously, this implies that over-indebtedness becomes a bigger threat,
which reinforces the importance of affordability assessments and
application of the reckless lending rules.
In the case of furniture loans and store cards - both of which are
readily accessible to the low to middle income consumer - there has
also been a decline in prices.
The historical data for motor vehicle loans and mortgages is sparse,
but the results suggest that the average asset loan value for a motor
vehicle loan of R225,000 was priced some 1.1% above prime in 2008. This
appears to be a lower mark-up than in 2002 and 2006. In the case of
mortgages, the few historical observations suggest a marginal decline
in pricing since 2006.
The survey of 59 of the country's key providers suggested that about
R1.058 trillion of credit had been provided (as of the end of June
2008). The biggest share was the R729.5 billion (69 %) attributed to
mortgages, followed by R176 billion (17 %) attributed to asset finance
(loans for motor vehicles).
The study, carried out by FEASibility, also shows that the introduction
of the NCA has changed the consumer credit market in a number of ways,
not least by integrating the previously capped usury market with that
of the uncapped exempt market. A major objective of the NCA was to
improve a lot of lower income groups, and it appears to have made
progress in this area.
Another key finding of the research is that providers surveyed by
FEASibility said that the NCA had played a key role in levelling the
playing field in terms of more consistent offers of credit, improved
transparency and better comparability.
In the interviews, the vast majority of providers mentioned that they
used credit bureaux data in their scoring. This use was also apparent
in the mystery shopping exercise, where some applicants were turned
down on the basis of the credit bureaux scores, however, the mystery
shopping exercise indicates that the benefits of improved disclosure
have yet to be generally experienced by consumers as it indicated that
providers are inclined to avoid presenting quotations as required by
the NCA. "This will be one of the focus areas for the NCR" says Davel.
Another positive impact of the NCA, according to the study, is that
providers reported that the NCA had slowed down the extension of risky
credit. Since June 2007, some providers had experienced a lower rate of
new account acquisitions. This was attributed to the higher rejection
rate, the requirements for affordability assessments, and providers'
own risk aversion in this particular phase of the economic cycle.
Given the income distribution in the country, it is not surprising that
the distribution of credit remains skewed. Low-income individuals
earning less than R1,825 per month (an estimated 8.6 million people)
have limited access to credit. Their credit is usually limited to
unsecured home loans, furniture loans, store cards and short-term
loans, and collectively represents about one per cent of the total
credit extended to households in value terms. In volume terms, based on
the number of accounts, store cards is the most common credit
instrument, followed by credit cards and personal loans. source: Sapa
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Using the equity in your home to consolidate debt
Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.
It often involves a secured loan against an asset that serves as collateral, which is most commonly a house (in this case a mortgage is secured against the house.)
The risk to the lender is reduced so the interest rate offered is lower.
This is also a loan and means another debt in your account. However, it has several advantages. It helps you consolidate your other debts, and thus to bring down the interest rates as applicable. One of the best features of a debt consolidation loan is that you arrange the monthly payments so they fit your budget. Each month, you know how you can manage your payments and get you some breathing room so that you can start to resolve your money issues.
Why consolidate your debts?
Having lots of smaller debts can be expensive and it can also be complicated to keep on top of all the repayments. Typically store cards and credit cards have interest rates ranging from 17% to 30%, whereas a short-term loan could have an interest rate of almost 40% depending on your credit history. So this form of borrowing is more expensive than a home loan, which will usually have an interest rate of around 12%.
On top of that you also have to remember to make your monthly repayments on each individual loan or credit card, which will probably mean lots of different payment dates, making it harder to keep track of what has to be paid and when. If you are late with a repayment, or you miss a repayment completely, you will probably be charged a penalty fee that will just add to the amount of money you owe.
So by having lots of little debts you will probably end up with lots of smaller, but expensive monthly repayments. If you consolidate all your debts into your home loan, on the other hand, you will have just one monthly repayment to make that will usually be less than all of your old monthly repayments combined.
Another important feature of consolidating bills is that it helps your credit record. As you accumulate more and more debt, you damage your credit record. I f you have missed payments or carry excessive credit card debt, your credit score suffers. When you consolidate your accounts and pay off your outstanding debts, you stop the damage being done to your credit. You show accounts that are paid off which helps with repairing your credit. So how does that benefit you? A better credit score means lower interest rates in the future for things like a mortgage, car loan or home refinancing. In the long run, it can save you thousands (maybe tens of thousands) of rands.
How Much Is Financial Stability Worth To You?
So what value can a debt consolidation loan provide you? It's all about finding financial stability for you and your family. That way you can look forward to a brighter financial future.
Eliminate high interest debt - the thing that causes you stress and anxiety month after month. By making only one payment each month, it's just easier - giving you the chance to resolve your debt issues. A debt consolidation loan will help you to improve your credit rating, which in turn will save you more money in the future.
If you would like to see what we can do for you please complete this form
Advantages and Benefits
South African consumers are swimming in a sea of debt. Currently consumer credit to households is estimated at R760bn with 14 million active credit consumers and 50 million open accounts. The average % of debt to income is 73%. There are 80,000 judgments for debt per month.
Making the minimum payment on all your credit cards, mortgage and personal loans will not cut it. The compounding of interest (interest on interest) is working against you and some day, you will find yourself in a big financial hole if you do not do something about it.
Therefore consumers are turning to debt consolidation loans, attracted by the benefits and advantages these loans have to offer. Lets discuss some of the possible advantages of debt consolidation.
Single Payment
Most consumers prefers to make a single payment instead of having to make payments to several creditors. This way, you can do away with the damaging effects of dealing with unmanageable debts. A debt consolidation loan will help you bring your entire debts under one umbrella. Keeping track of your money will not be difficult.
Interest Rate Reduction
A major benefit of debt consolidation loans are due to the fact that the interest rates are half to one-third the interest charged for revolving credit card accounts. Debt consolidation loans are secured loans - meaning your home is used as collateral while borrowing money. This reduction in interest rate turns out to be a blessing for consumers.
Monthly Admin Fees Savings
By consolidating your debt, you are not only saving on the overall interest rate, but you are also saving on all your monthly charges for all your separate accounts. This can be substantial if you take into account all the monthly administration charges for your bond, overdraft, loan, car repayments etc.
Low Monthly Payments
You eliminate all your high interest debt when you consolidate your debt. You will now be making a low monthly payment on your debt consolidation loan and this is the only loan you need to worry about and pay off.
However, before jumping into debt consolidation loans, you should do some calculations first on the interest you are paying on your current credit card and personal loan accounts and then check how much you will be saving by getting a debt consolidation loan. Next you should plan to use these savings (interest) to pay off your debt consolidation loan as soon as possible, to maximize savings.
Tax Free Investment
The best investment you can make is to repay high interest debt. The return on this investment will be in excess of 20% on credit card debt, for example, and that return is tax free. Fund managers who have achieved the same rate of return for their clients the past year are very few and far between.
The impact of NCA
The introduction of the National Credit Act (NCA) has also made a big difference to the way people get credit and how much credit they are allowed to have. Now credit providers have to do more work to show that by giving somebody credit, whether it is a credit card or a loan, they are not making them over indebted. Being over indebted means there is a danger that the consumer may not be able to meet their loan obligations and may not be able to make their monthly repayments.
It also means that consumers have to prove they can afford any new credit agreement by declaring how many loans or debts they currently have, supported by evidence, as well as how much disposable income they have left after paying off their debts and other expenses.
Previously all a consumer had to do was show a provider a current pay slip to prove they earned enough to pay for the individual credit agreement they were applying for. This did not take into account the total amount of debts a person had, which sometimes could add up to more in repayments than they actually earned. This caused a lot of problems and so the NCA was introduced.
What this means is that consumers struggling with smaller debts are now finding it harder to take another small loan to fill the gap because they fail the new NCA criteria and are deemed to have too much debt already. They are literally drowning in debt and are in danger of missing payments and becoming bankrupt, which could even result in them losing their homes.
If they have a property, however, debt consolidation could get them out of difficulties, clear their debts and give them time to get their finances straight.
Here's an example of how small debts add up:
" A credit card balance of R20,000 at a rate of 18% will cost you R300 a month in interest alone
" R30,000 on a store card at a rate of 25% will rack up R625 a month in interest
" A R50,000 short-term loan at 30% will generate interest of R1,250 each month
" So R100,000 in small debts will cost R2,175 each month just in interest repayments
And that's without even paying off the actual amount you've borrowed - but if you only ever pay off the interest, your debts will never decrease.
If you also have a home loan of R500,000 at an interest rate of 12% over 20 years, you will need to find an additional R5,500 each month in mortgage payments.
Unconsolidated debts
So for a total debt burden of R600,000 you will have fork out R7,675 every month just to keep your head above water.
If, however, you were to also pay off some of the actual debt each month, say R500 for each of the small debts, for example, your total repayments on a R600,000 debt would be closer to R9,175 each month.
Consolidated debts
If, instead, you were to combine all your small debts with you home loan and take out a new mortgage for R600,000 at 12% over 20 years, your monthly repayment would fall to around R6,600 - saving you hundreds, possibly even thousands of Rands each month.
In addition you would now only have to make one single monthly repayment and you would be repaying off all your debts, not just the interest.
Equity in your property
To be able to consolidate your debts into your home loan you need have equity in your property. This means that the current market value of your property must be higher than the size of the home loan you have on it. If your property is worth R750,000 and you have a mortgage of R500,000, then your equity is the difference between these two figures - R250,000.
So if you currently have a home loan of R500,000 and you wish to consolidate R100,000 worth of smaller debts into a new mortgage, then your property needs to be worth more than the new home loan amount of R600,000. How much more will depend on the provider and what percentage the total home loan is of the value of the property.
The smaller the percentage of the value of the property - and therefore the greater the amount of equity - then the more likely the lender is to give you a debt consolidation loan. If you have a lot of equity then your lender might even be willing to lend you money in addition to the debts you are paying off.
If you have very little equity in your property then you might struggle to get a debt consolidation loan. Lenders will also need to take into account other factors, such as your income and your credit history. As with any credit agreement you will have to prove that you can afford to meet the repayments on your new debt consolidation loan. If you have a poor credit history because of missed payments or judgments against you, this may also count against you.
A fresh start
Debt consolidation can help people make a fresh start. By rolling all their debts into a single, affordable loan, they can remove the stress of managing several loans and debts, can save themselves money on their monthly repayments, and take time to get their finances straight.
To make certain that people use their newly consolidated home loan to pay off all their outstanding smaller debts, many lenders actually insist on the consumer giving power of attorney to a lawyer whose job it will be to pay off those debts on the consumer's behalf. They will probably even close down your credit card, store card and short-term loan accounts as well. This ensures that the original debts are cleared and that you are not able to incur new debts by keeping the cards and loans open.
As a result of the NCA, it also means that once you have taken out your consolidation loan, you will find it harder to get new credit anywhere else - such as store cards or credit agreements - because you might not meet the NCA's criteria.
It is also important to take responsibility for your own debts and ensure that you do not start spending more than you earn and begin building up debts again. You should also be aware that because your new debt consolidation loan is a home loan, and therefore secured against your property, if you do not keep up repayments you will be at risk of losing your home.
If, as a result of your consolidation loan and new lower monthly repayment you find you have money left over at the end of the month, you should pay more into your home loan because not only will this bring down the length of your mortgage, it could also save you tens or even hundreds of thousands of Rands in mortgage repayments.
If you are struggling to pay your debts, or you are worried that you have too many smaller debts, it is important to investigate debt consolidation sooner rather than later and before your total debt burden gets too much for you.
Twenty Four 10 has a debt consolidation product to help you work out what the best solution is, how much you can afford and how much you could potentially save.
Speak to an equity broker today to get more information about consolidating your debts.
Debt-Free Living
Debt is crushing the dream of many South Africans to become financially independent. However, the determination to get out of the rat-race remains a driving force in keeping the dream alive. You can reduce your stress and live a debt-free life if you make some drastic changes in the way you live.
First, forget the Joneses. There will always be people, even your peers, who will have more than you. It's impossible to keep up with them and in most cases it's absurd to even try. Let them have their flashy cars, designer clothes, and mammoth-sized houses. Chances are, they are swimming in debt to impress others.
Whether or not you are impressed doesn't matter. What matters is your financial future. Would you rather impress friends and neighbors with glitzy items you can't afford or would you like to live a life free of worrying how to pay for all the junk?
Next, re think your day-to-day spending. Now that you're not trying to keep up with the Joneses by buying new boats, jewelry, and flat screen TVs, let's address the little things that add up. Daily stops at the local coffee house for a latte, buying lunch or bringing take aways home for dinner, and DSTV channels all add up. Instead, brew your own coffee, cook homemade dinners, and get your movies for free at the library.
Keep track of your spending each day and get creative. Try a less expensive golf course instead of a private one, or take in a matinee instead of a night performance. You can still enjoy life but see if you can tone it down a notch or two and pocket the savings.
Once you're comfortable living within your means, start living beneath them so that you can work on paying off your debt. Commit to paying off your credit card and then only use it for emergencies. If you can swing R500 a month toward your credit card, buckle down and try to increase that amount to R600. As you become accustomed to this monthly payment, it will become easier. Challenge yourself to pay more each month until your debt is wiped clean.
Afterwards, you'll be rewarded with that amount each month to do with as you please. Instead of going back to your bad spending habits, build up your emergency savings or put that money toward retirement. You can never wrong by choosing to save money.
Paying off car loans, student loans, and mortgage loans never hurts either. Make extra payments toward reducing the principle and get ahead. By doing so, you'll save thousands in interest over the course of your loan. Consider applying windfalls such as tax refunds and annual bonuses to reducing your debt.
If your car is paid for and still in working order but you find yourself wanting to replace it, consider postponing your purchase. Challenge yourself to postpone your new car purchase by two months and pocket what you would've spent on car payments. Now challenge yourself to postpone it another two months. If you were expecting a R3,000 car payment, you will have saved R12,000 by waiting. Consider making car payments to yourself instead of replacing your car. Doing so will save you thousands each year . If you must buy a new car, go for a one or two year old model and get a better deal.
Living debt-free means sacrificing what you can't afford. If this means driving a five-year-old car while the neighbors drive a brand new one, so be it. If it means living in a 150 square meter house compared to the 400 square meters one your sister lives in, that's fine too.
By freeing yourself from the bonds of debt, you will have peace of mind.
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