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how loans are approved

Before a credit provider decides to grant you credit (and at what interest rate), they first need to determine if you are a reliable credit client based on your actions and behaviour.

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Credit providers want to be comfortable that the credit they grant will be paid back on time and in full. Therefore, they conduct a credit risk assessment to evaluate potential borrowers. Download our free Good for Credit booklet for more information. 


Your affordability

This is the amount you can afford to repay per month.

How do credit providers determine your affordability?

  1. Credit providers can see how much you take home every month by looking at your payslip. If your income varies because of commission or overtime, they calculate an average based on your income over a period, usually between 3 – 6 months.
  2. By looking at your bank statement they determine how much you already owe and if you’ll be able to afford a new loan on top of other financial obligations.

Can you pay back the full loan amount?

Credit providers look at the money you have left after all deductions and expenses to evaluate how much you can afford to pay on a new loan. Information on how reliable you were in paying your previous and/or existing loans will also be used to help determine whether you pay your loans on time. To them, this is an indication of how you will repay the new loan.


Your employment

How stable your employment (permanent employment as opposed to being a contract employee) is, will affect the amount of credit you qualify for. Credit providers will also look at how long you have worked at your current employer and in some cases require proof of employment.


Your credit behaviour

This shows the risk you pose to credit providers.

Will you pay your instalments?

Your willingness to pay back outstanding credit affects credit providers’ decision to lend you money. By getting your credit profile from the credit bureau, they can see if you have been a good credit client with your other loans. This will show them how much of a risk you are to them should they give you a loan. The lower the risk you pose, the higher your chances of getting approved for credit.

Do you pay back your credit as agreed?

Credit providers will check your payment history on previous loans to see if you paid your instalments on time, every time. Only when they are happy that you will pay back the loan as per your agreement, will they make you a credit offer.

Credit providers will review these areas of your financial position before granting credit so they’re comfortable that the money they borrow you will be paid back on time and in full. Save time by reviewing this in advance.

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