How Risky Are Loans for Blacklisted
Posted by financial advisor on
It is a common misconception that a person who is blacklisted has to go for the first loan which they are offered. The reality is that the market for loans for blacklisted in South Africa has grown immensely over the years given that millions of people fall into this category. Hence, you have a variety of products to pick from. This, however, does not mean that things will be easy as far as repayment is concerned. It is up to you as a borrower to assess the risk which you will assume.
Identify your Risk
There are two factors which make the personal loans for blacklisted riskier. Firstly, they come with higher interest rate. This pushes their total cost up and consequently the size of the monthly instalment. As a result, they become more difficult to repay. The second factor is the lack of collateral. This not only provides for higher interest, but may affect the borrower's repayment motivation.
It can be safely said that these loans are fairly risky for both the lender and the borrower. However, there are various mechanisms with which risk is offset.
In order to adhere to the National Credit Act, the lender must ensure that the borrower has the means to repay their debt. This allows them to set a cap on the amount which is extended to the lender based on their monthly disposable income. The NCA sets a cap on the interest rate as well. It cannot increase endlessly.
There are various things which you can do as a borrower to lower the risk of default. Loan extension is a possible option. Debt consolidation may also be a good idea. Consolidation loans are readily available from large banks like Standard Bank and African Bank and from smaller lenders as well.
It is perfectly possible to offset the risk associated with loans for blacklisted and manage their repayment effectively.