When you apply for a personal loan, it’s usually because you need the money quite urgently.
It could be an essential car repair or getting financial approval before starting a home renovation. Having the application stall because you don’t have the right paperwork is frustrating.
Marlies Kappers, the head of marketing at Direct Axis, a specialist financial services company, explains that whatever the reason or how big or small a personal loan, some basic paperwork is always required.
Changes to the law, specifically the National Credit Act, have made the conditions for providing loans even stricter.
These include the credit provider needing to get proof of current income over a three-month period, as well as taking into account existing debt repayments.
“By law, finance companies must confirm income and how much the customer can afford to repay before they can grant a loan. This isn’t just onerous paperwork, but is designed to protect consumers from unscrupulous lenders or getting into too much debt.”
When applying for a personal loan, you will always be required to provide proof of income. Depending on the size of the loan, other basic documentation that will be required is proof of identity and residence.
Proof of identity: In most cases a South African barcoded identity document is all that is required. If you do not have a South African ID, or have lost it, a valid passport or driver’s licence is acceptable as long as it is accompanied by a declaration certified by a commissioner of oaths.
Proof of income: If you are employed this is fairly straightforward. You will need to provide payslips for the past three months or bank statements going back three months with your income clearly marked.
Self-employed people will need to provide bank statements for three months or an annual financial statement for the business drawn up by an auditor or accountant.
Pensioners can provide bank statements for three months or alternatively, a pension, investment or retirement annuity statement covering at least three months.
Proof of address: You will need to provide proof of residential address and this must have your name or initials, surname and address on it.
Acceptable documents include retail accounts; utilities bills for rates, water or electricity; telephone or cell phone accounts; and bank statements on an official document or form. These must be less than three months old.
Mortgage statements are also accepted. These can be less than six months old.
An important point to note is that the proof of address must be from an independent source. This means, for example, that Direct Axis cannot accept statements from FNB, Rand Merchant Bank or Wesbank, as these companies are all part of the same group.
These days technology means you don’t have to physically hand over the documentation. You can do it by e-mail, using the camera on your mobile phone or uploading documents to a pin-protected web-page. Whichever method you use, it is essential that the documentation is legible and clear. If it is not, your application will be held up.
