Publicising the reasons why people most often have their bond applications rejected has helped those who come to Rawson Finance, the Rawson Property Group’s bond origination division, to greatly improve their chances of being given a bond, says Mike van Alphen, National Manager of Rawson Finance.
“The simple truth is that a fairly high percentage of those who come to us, in all the major centres of South Africa, are unaware of the full criteria on which banks judge their credit position. We can help them to prequalify and in many cases to put matters right if they are at first not accepted.”
Just on 30% of all declines from the banks, said van Alphen, come about because the credit bureaus have data showing that they have, at some stage, had a court judgement against them. However, it is surprising how often clients are not aware that these matters are recorded.
Similarly, the credit bureaus often have on their files in-depth records of arrears on credit accounts. These impaired or blemished records quite often do not relate to significant amounts but they will be cause enough for the bank to decline their application.
Such situations are likely to be greatly improved by the new ruling that paid up judgements and debts must be deleted from all records. Potential borrowers in all categories, said van Alphen, should make use of the one free personal credit report per annum, to which every South African citizen is entitled, by which they can gain the latest information on their credit position. To do this, the applicant should visit www.mytransunion.co.za.
“We are hearing rumours that certain paid up credit accounts, which were formally in arrears, are still listed by the Credit Bureau. However, the credit bureaus have been given just two more months to de-list any such accounts and after that there should be no further trouble in this respect.”
A second major reason for declines (in 25% of cases) is affordability. In these cases the banks simply do not accept that the applicant’s income justifies him for the loan he wants.
Here, the clients themselves may be to blame because they have failed to reveal the full extent of their commitments, which are often payable monthly. We find on examining their bank accounts that they have simply forgotten to reveal such regular salary deductions as their life, health, pension and insurance payments, retail accounts, cell phone accounts, credit cards, hire purchase deals and personal loans.
When applicants hold back on these details, it may simply be because they lack clerical skills or have forgotten certain items. Alternatively they may be hoping that the credit bureaus may not pick up information of this kind. This is very unlikely as the efficiency of the bureaux is widely known.
A third reason for the rejection of loan applications, said van Alphen, is what is known as ‘poor account conduct’. This covers certain internal banking matters such as RD cheques, unauthorised overdrafts and an abuse of any kind of the banking system.
A fourth reason for rejections may be that the banks view the property as overpriced – i.e. not sufficiently valuable to justify the loan for which the applicant has asked. This, however, happens very seldom, probably in less than one percent of rejections.
The above list of problems that applicants can face can give the impression that it is very difficult to obtain a loan. However, most of the bond origination organisations are increasing their turnovers year-by-year. Rawson Finance, for one, is improving its position by 35% per annum – and the good news, van Alphen repeated, is that with most bond originators having upped their skills in pre-qualification, the chances of the average applicant being successful have been greatly increased.
