Loans without Affordability Checks – The Pros & Cons

loans without affordability check
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Most loan application processes involve comprehensive financial background checks. Lenders will need to know your full credit history, employment details, and even spending habits before handing over any cash. But is there a way to skip these affordability checks and still get a loan? 

South Africans can find a number of payday loans and personal loans that do not require background checks. These loans are designed to appeal to people who have been blacklisted by a credit union, have poor credit, or need a fast loan. Let’s discuss loans that don’t require extensive affordability checks, their pros and cons, and everything else you need to know to make an informed financial decision.

How do Loans without Affordability Checks Work?

Loans without affordability checks are generally unsecured with high interest rates. These short-term loans usually pay out within 24 hours of being approved and have smaller loan amounts of R10 000 or less. Depending on the lender, the type of loan and loan amount, your loan term can range from a few days to one year. 

 Lenders who do not have strict affordability checks still have a loan application process. It is simply the case that potential borrowers do not need to meet strict criteria set out by traditional lenders. These types of loans are also sometimes similar to ‘no-credit-check’ loans, in terms of the more relaxed and often online application process. 

You will need to be over the age of 18 to apply for a loan in South Africa. Some lenders may further stipulate that you need to be over 21 years of age. You will likely need to provide your South African Identity Document to confirm your age and nationality.

Beyond this, the requirements for your loan application vary. Online loan providers require you to have access to the internet and a valid South African bank account. Additionally, you may need to provide up to three months’ bank statements. If you are applying for a payday loan, you may be asked to provide a recent payslip or proof of employment. 

Why do Lenders Offer Loans without Affordability Checks? 

In South Africa, the National Credit Regulator (NCR) is responsible for promoting responsible credit granting. The National Credit Act (NCA) sets out the rules that lenders need to follow as responsible financial institutions in terms of granting credit. Lending responsibly means ensuring that your borrowers are not overextending their credit.

However, there are many South Africans who may not be able to prove that they can afford a loan. This includes people who do not have regular income or employers, for example, entrepreneurs, freelancers, and self-employed artisans. Other people who can benefit from these types of loans are younger South Africans who may not have had a chance to build their credit scores.

Adding to this, there are many situations where someone may need quick access to cash. Traditional loans with extensive affordability checks may not pay out fast enough. For example, if you’ve been a victim of theft and need to replace a device urgently, or if you’ve landed in the hospital and need money to cover your stay and emergency procedures. 

When choosing a lender, it is very important to check if they are registered with the NCR as there are plenty of unscrupulous lenders that offer short-term, personal or payday loans with no credit or affordability checks. These are usually marketed to unassuming South Africans who are desperate for cash and do not realise the loan has extremely unfavourable, or even illegal, terms and conditions. However, you can rest assured that any loan quote you find on our site is from a trustworthy, NCR-registered lender.

The Potential Risks and Rewards of Taking Out Loans without Affordability Checks 

Let’s weigh the pros and cons of taking out a loan that does not require an affordability check.

 The pros:

  • Quick access to cash loans for emergencies or cash shortfalls at the end of the month.
  • People who have been blacklisted, and have poor or non-existent credit histories can apply.
  • Less paperwork and hassle during the application process

The cons:

  • You may end up struggling to repay the loan, as your affordability was not taken into account when deciding the principal loan amount, interest rate or other conditions of the loan.
  • These loans may not help your credit score improve, even if you are consistent with payments.
  • These types of loans often attract high interest rates and other terms that are unfavourable to borrowers. 

Consider these Alternatives to Loans without Affordability Checks

Remember, affordability checks benefit both the lender and the borrower. The lender receives reassurance that they will receive the loan instalments and interest on time and in full. The borrower does not end up taking on more debt than they can reasonably handle.

If you have carefully weighed the pros and cons and found taking out a loan that does not require affordability checks too risky, there are a few things you can consider doing instead. 

  • Borrowing money from close family members or friends
  • Evaluating loan options at credit unions such as Transunion
  • Utilising other forms of credit, such as your credit card
  • Negotiating a payment plan with the company/person you owe
  • Dipping into existing savings
  • Adjusting your budget to reduce luxuries and unnecessary expenses

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*Representative example: Estimated repayments of a loan of R30 000 over 36 months at a maximum interest rate, including fees of 27.5% APR would be R1 232.82 per month. BetterLoans is an online loan broker and not a lender. Our service is free, and we work with NCR-licensed lenders in South Africa. Interest rates charged by lenders can start as low as 20% APR, including an initiation and service fee determined by the lender. The interest rate offered depends on the applicant’s credit score and other factors at the lender’s discretion. Loan amount R500 – R350 000. Repayment terms can range from 3 – 72 months. The minimum APR is 5%, and the maximum APR is 60%.

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