Do you earn R5000 and desperately need a loan? Great you’ve come to the right article. I did some research into what kind of loan you can get with your salary, here’s what I found.
According to Nedbank’s loan calculator, you will qualify for an R205,000 loan on an R5000 salary with an annual interest rate of 7% and a repayment period of 240 months. That said, your personal loan amount will vary drastically depending on your credit score and your monthly expenses.
Keep reading to find out how to know if you will qualify for a loan, as well as some of the best places you can apply for a personal loan online with a R5000 salary.
How Do You Know If You Will Qualify For a Loan?
There are several things banks look at before they issue out a loan. Basically, in a nutshell, it’s a risk game to them. If you’re less likely to pay back a loan based on your history, then there’s more risk on the bank, which means they’ll be less likely to give you a personal or mortgage loan.
On the flip side, if you’ve been a responsible citizen with how you managed your debt in the past, then you’ll be considered low risk. In this case, banks will literally be throwing loan offers at you because it’s an easy and low-risk way for them to make money on interest.
Here’s how you can find out how ‘risky’ you are to the banks and how likely you’ll be to get a loan.
Calculate your debt-to-income ratio.
Your debt-to-income ratio is probably the biggest contributor when it comes to how willing banks will be to loan you money even though it doesn’t directly affect your credit score. Banks are usually happy to loan money to people who have a debt to income ratio anything lower than 38%.
How to calculate your debt to income ratio?
In a nutshell, the debt-to-income ratio divides your monthly debt—which includes all your monthly expenses—by your net monthly income.
For example;
- MONTHLY DEBT. If you pay R400 per month for your car, R1000 for your rent, and R300 per month on a previous loan payment, then your monthly debt will be R1,700.
- MONTHLY INCOME. Let’s assume you earn R5000 per month.
The calculation will be:
Monthly debt/monthly income = 1700/5000 = 0.34 = 34%
In this example, your debt to income ratio (DTI) will be 34%. Which is considered as acceptable to lenders and you’ll have a good chance of getting a personal loan or maybe even a mortgage.
Check your credit score.
Even though your credit score can’t asses your DTI ratio because they don’t have access to your earning, it’s still a good indicator to use to figure out how much banks will be willing to loan you.
So what’s a good credit score?
- 800 credit score and up is considered to be excellent. The success of a loan will probably be guaranteed in this area.
- 740 to 799 credit score is an above norm credit score. You’re still way above the averages here and banks will probably be happy to throw money at you.
- 670 to 739 is still relatively good. Lenders will see you as low-risk borrowers.
- 580 to 699 is considered to be ok. This is an ‘average’ area. You’ll probably find it very difficult to get a loan if your credit score is in this range.
- 579 and below would be considered bad. If your credit score is in this area, you probably won’t get a loan of any sort.
How to check your credit score online for free?
If you’re reading this article then chances are you’ve never checked your credit score before. The good news is you can check it at-least once a year for free so don’t get roped into paying for it.
According to the National Credit Act, all South African’s are able to get a credit report for free once per year.
Here are the verified credit bureaus you can use to get your free credit report:
Speak to your banker.
Another way you can check if you will qualify for a loan is to simply speak to your banker. They deal with loan applications all the time so they have a good ‘feel’ for who will get a loan, or who won’t.
They’re also very aware of all the stuff we discussed in this article so they’ll be able to do the DTI calculations for you, and they have the tools to check your credit score for you.
What makes their advice even more accurate is they have access to all your finances, that knowledge coupled with experience and your credit score will put them in a very good position to give you advice.
Do you pay your bills on time?
This is another indicator if you’ll be able to get a personal loan or not. If you find that you’re constantly late for bills, and you feel like you simply can’t keep up then chances are that you won’t get a loan.
Loans are funny things. The more you need them, the more you can’t have them.
If you’re in this position I would highly suggest staying away from loans otherwise you’ll just be digging yourself into a deeper hole that will be more difficult to get out of.
Rather find a way to increase your monthly income. I wrote a blog post that talks about all the different ways you can make money online in South Africa without investing money upfront. So if you’re looking to increase your income, then make sure you check it out.
Best Places to Apply For a Personal Loan Online
African Bank (Up to 250,000)
Offers personal loans up to R250,000 to anyone over the age of 18 with a fixed payment structure. A fixed payment structure means you know exactly how much you need to pay back every month which is ideal for if you want to plan ahead.
APR will for this loan will range between 15% to 27.5% and you can choose to pay the loan back over 7 to 72 months.
The documents you need to apply:
- Latest bank statement shows at-least 3 of your latest salaries.
- Recent proof of residence no older than 3 months. You can usually use your utility bill for this, or a bank statement that has your updated address on it.
Follow this link to read more information on the loan and to start your application.
Wonga (Up to R4000)
Wonga is a great option if you’re looking to loan small amounts of money quickly. The process to apply is pretty quick, easy to use and because they’re loaning you a little bit of money, they don’t ask for a lot of documentation.
However that being said be very careful with quick loans. They almost always come with high fees and you need to pay them back quickly.
For example, when applying for a R4000 loan over 31 days with Wonga, the fees rack up to R903 which is almost 25% in fees just for a 31 day loan.
The documents you need to apply:
- Most recent proof of income
- SA ID number
- Cellphone number
- Bank account details
Follow this link to read more about Wonga loans and to apply.
Direct Axis
This loan provider offers medium term personal loans from 24 months to 6 years. On their website they state that you can apply for a loan as long as you have a good credit record, and an income of at-least R5000 per month.
Documents you’ll need include the following:
- 3 months bank statement as proof of income
- Any document that can confirm you proof of address
- Copy of your South African I.D
Learn more or apply for a loan with Direct Axis here.