Getting a Loan Without a Credit Check
A credit check can be a liability when applying for a loan if you’re a debt-laden South African or the owner of a startup with negative cash flow.
If you do qualify for a loan, prospective lenders will hike interest rates based on your credit history and score.
No credit history means no way to assess risk
Similarly, when you have no credit history, a credit check confirms that there’s no discernible way to assess risk.
Without a proper risk assessment, it’s unlikely that traditional lenders, like banks and credit card companies, will consider a loan application.
Credit checks impact the cost of borrowing
It’s not only people with poor financial track records who want to avoid credit checks.
A consumer in good standing may find repetitive checks imply financial impropriety. This can negatively affect the ability to borrow money at a reasonable rate.
How do lenders assess risk?
Your credit score is the key determinant in the loan qualification process. It’s a number from 0 to 999 that is calculated from the details on your credit profile.
The higher the number, the better the credit score.
Your credit score is an invaluable asset. A bad credit score means that borrowing money through conventional channels can be exceedingly difficult and expensive.
What is a bad credit score in South Africa?
A score of 581 and below is deemed high risk. A lender who is willing to provide a loan will usually load the interest rate to mitigate the risk.
A score of under 526 is considered extremely high risk and the probability of securing finance is negligible.
Difficulty getting a loan: poor credit vs. no credit rating
The ease of borrowing money in South Africa is severely hampered by a poor credit score.
Consumers who have defaulted on loans, made late or sporadic credit-card payments, or had their electricity or water cut off due to non-payment, may find it virtually impossible to qualify for finance through the usual channels.
How to use your payment record
Conversely, getting a loan when you have no credit rating may be challenging but it’s not impossible.
If you’re disciplined when it comes to managing your finances, you can use your existing payment record relating to monthly obligations, like medical aid, vehicle insurance and flat rental, to prove you’re a reliable prospect.
Options for getting a loan without a credit check
Getting a loan with a poor credit record is difficult so where does this leave the millions of South Africans who need funds to cover life’s emergencies?
Fortunately, there are ways of accessing cash without having to go through a credit check.
A pay-day loan is a viable option for employed South Africans. It’s a form of micro-loan that tides you over until the following pay-day when you’re expected to repay the loan, plus interest, in full.
However, if you fail to settle the debt, the lender usually imposes high penalties and pursues the debt through the courts. Your monthly income and your assets are at risk.
An asset-based loan is a low-risk option secured by the value of an asset, such as a luxury wristwatch, gold or diamond jewellery, or a fully paid-up motor vehicle.
The amount of money you can borrow depends on the appraised value of the asset, which is handed over to the lender as collateral. Terms usually vary from three to 12 months.
If you’re unable to settle the loan, the worst-case scenario is the lender sells the asset to recover the loss.
Getting a car loan from Pawn My Car
Pawn My Car is a registered asset-based loan provider with branches in South Africa’s major cities. We specialise in providing loans backed by fully paid-up cars, trucks, bakkies, motor bikes and boats.
Our terms are flexible, we process loan applications while you wait and we charge interest rates in line with National Credit Regulator (NCR) recommendations.
The loan we offer is secured by the asset you provide. As a consequence, information like your employment status and credit rating simply aren’t relevant.
We also don’t share any information with credit bureaus. This means that cash loans from Pawn My Car have no effect on your existing credit rating.