How do lenders assess your loan application?



the difference between secured and unsecured credit.

In our last article, we had a look at the history of credit, as well as the different types of credit available in South Africa, with a special focus on the difference between secured and unsecured credit. When it comes to secured credit, given the security of an underlying asset that has value, the lender offers better interest rates on the debt and the debt is normally for a longer term. Typically, cars are paid off in 5 years and homes over 20 years. There are a range of factors that determine the terms of a loan. Banks and financial service providers have different criteria and requirements.


what do lenders look for when you apply for a loan?

When assessing your loan application, the lender is trying to gauge whether you’re a safe bet to loan money to. Generally, they will be interested in things such as: your employment and employment history, your net disposable income, your current debt repayment, whether you are an existing customer, a consumer risk profile and you will be evaluated through a credit score and an affordability assessment. These factors, as well as market-related factors will be determinants of your loan and the interest that you will have to pay. We will touch more on this in next week’s article.

what’s happening locally?

Some reports refer to South Africa as the world’s capital for borrowing. We are seen as a nation that collectively struggles to manage its credit. Fortunately, regulation in South Africa is shifting to protect the borrower. Regulation in South Africa has taken a hard-stance on P2P lending markets. Section 40 of the National Credit Amendment Act 19 of 2004 stipulates the specifications of who can be a credit provider. In 2014, the lending threshold was R500 000 and in 2016, this was changed to R0. In short, any person who intends on loaning money with a credit agreement, must register as a credit provider.


why do south africans struggle to manage their credit?

There is still a lot of work that needs to be done. There are some lenders extending credit to those who do not qualify for it and can’t afford to pay back their debt – known as reckless lending. For perspective, studies have found that almost 40% of borrowers have impaired credit records. This means that they’re struggling with their repayments. Almost 70% of the credit in South Africa is unsecured and relates to credit cards and store accounts. So, most of the debt in South Africa is at high interest rates. This makes it expensive for borrowers and many are unable to pay back their debt.

what about people who use credit responsibly?

There are hordes of borrowers who have used credit responsibly. They use credit to get themselves an education, start a business, get themselves through the month or pay for a medical emergency. The list goes on, but the takeaway is that credit can be used to your benefit when you manage it responsibly. Are you looking to apply for a personal loan to make your dreams a reality? You can get a personal loan through Virgin Money here.


The way that you manage your credit can influence the rest of your life and your ability to get other credit in the future. In later articles, we will share ways that you can manage your credit responsibly, such as: how to keep track of your spending, advice on making payments and tips and tricks to building a healthy credit history. However, the first step to managing your credit responsibly is to know your credit score. Knowing your credit score is part of responsible borrowing so you know what you can and can’t afford and also avoids lenders taking advantage of you by charging excessive interest rates. If you haven’t already, get a free credit score here and start borrowing responsibly.



Join us next week as we dig deeper into how lenders decide who to lend money to and how much.


Secured, unsecured, bond, credit card? What does it all really mean?


What’s the history of credit?

Consumer credit is believed to have been invented in 3500 B.C. Originally thought up by the first populous city, Sumer. Loans were issued for agricultural purposes to help people start farming themselves. Modern day formalised credit only popped up in 1919 when the introduction of the consumer car by Ford made instalment financing necessary to allow consumers to pay off larger items over time.

From there, the credit boom started. Through the ages, variations of credit have sprung up to help consumers bridge the gap in financing their expenditure while managing their daily cashflow needs to maintain their lifestyle. The availability of this credit ultimately promotes spending – which allows consumers to forgo future consumption for today’s needs.


What Type of credit products are out there?

Broadly speaking, you get two forms of credit in South Africa – secured and unsecured. The difference relates to what security the lender has over the money they’ve lent you. Consider a bond to buy a house – if you miss repayments on your bond and are no longer able to afford them, the lender can sell your house to pay back the loan. This process is what you see at auctions as banks try to offload assets. They do this to settle their debt as a result of a consumer defaulting on the repayment. In this example, the house was the security to the lender. In terms of vehicle financing, the car is used as collateral should you be unable to repay the loan.


What about unsecured credit?

“Unsecured” credit implies the lender has no security to hold on to and is therefore at higher risk. The lender may charge higher rates and keep loans shorter in term to avoid opening themselves up to greater risk. Credit cards, store accounts and personal loans all fall into this category. In order to contribute to the remaining balance on your credit card, you will be required to pay a minimum monthly amount. Credit cards and store accounts enable purchases that have limited to zero resale value – think clothing, food or experiences funded by credit. With personal loans, you must pay back the loan in monthly instalments, but with an added interest rate.


Tell me about credit repayments 

If we dive a little deeper, there are two central types of credit repayments. Firstly, there is installment credit. Installment credit is distinguishable by the prearranged length and end date of the credit account. With installment credit, there is usually an agreement which states a repayment schedule. Your primary amount is reduced every time you contribute to the repayment. You will know how much you have to pay per month and for how long you will be required to make these payments.

With revolving credit, credit cards are probably the most identifiable type. With revolving credit, the credit limit does not change once you make a payment. You can continuously go to your account and borrow additional money, as long as you do not exceed your maximum. You can borrow up to a certain amount, but because of this flexibility, there are often lower borrowing amounts and higher interest rates.


Which credit repayment method is better for my credit score?

Revolving credit is typically a riskier way to borrow in comparison to installment credit. This is especially true when taking your credit score into account. Your credit utilization rate makes up a significant share of your credit score. Your credit utilization rate looks at your overall limit of each card and how close your bank balance is to this limit. Therefore, if you are carrying high balances, your credit score will drop. It’s in your best interest to find out your credit score so that you can manage and understand your current credit utilization. You can get a free credit score here so that you can manage your credit.



Join us next week as we dig deeper into the credit space in South Africa and how lenders manage their debt.

Is taking out a personal loan going to be good for my future?


Too often, the idea of a loan is met with negative associations. This is because people view the need for a loan as a direct result of poor financial management or overspending. This is certainly not the case. A loan can in fact be a person’s investment in their future.


When should you not take out a loan?

Why should you put your hopes and dreams aside when a personal loan could help you realise your aspirations? However, there is a big distinction between taking out a loan for the right reasons and taking out a loan that could harm your financial wellness. If you’re taking out a loan to pay off existing debts, you could be doing yourself far more harm than good. In this situation, you should be talking to your credit providers and working with them on a plan to reduce your debts without having to put yourself deeper into debt. Responsible lenders should be able to work with your specific challenges and provide solutions that reduce your debt burden.

Why should you take out a loan?

On the other hand, taking out a loan to further your or your children’s education, make some home improvements or to support growing your small business – these are good reasons to look at taking out a personal loan, as these things all contribute to improving your financial wellness in the long term.

Why a personal loan?

A personal loan is exactly what it says it is. It’s for “personal” use to improve your personal financial wellness. It’s also a relatively simple type of loan to apply for. Two key factors that come into play here is your credit score and your income after you have paid for all your expenses (disposable income). Just imagine the opportunities that a personal loan can create for you. It may just be a loan today, but it could mean that your child gets the best education possible; you finally manage to make those much-needed home renovations or upgrade the car for the growing family.

The important thing to remember is that a personal loan should only be taken to help grow your future and not as a means of paying off debt, as this could lead to a problematic future. All you need to do is ask yourself, “Is this personal loan going to create opportunities for me and am I going to be better off down the line?”

Still not sure about what a personal loan can do for you?


Here’s our top 5 reasons why a personal loan could be good for your future:



Invest in yourself 

Whether you’re planning a business endeavour, you want to give your kids the best education opportunity or maybe you’re even considering advancing your own education – a personal loan can help you quickly get started in the right direction.


Paying for education

This is undoubtedly a way in which a loan can help to pave your future. Your education is a vital piece of the puzzle and you may need help to pay for the associated fees. Imagine: going to school, getting into the university of your choice, getting hired straight out of varsity, moving to your dream job, climbing the corporate ladder and becoming CEO – none of which would have been possible without that initial loan for your education


Home makeover

Taking out a personal loan to finance your home improvements is a good option. Whether you want to fix up your kitchen, add a bedroom for your growing family, install solar panels or even do some general maintenance, a personal loan can help make your dream home a reality.



Often, accidents or emergencies don’t give us any warning, so you may not have the necessary funds on-hand to be able to deal with this. That’s where a personal loan can swoop in and save the day. Personal loans can be granted relatively quickly; therefore, they could be used to efficiently finance an untimely emergency.


Adding to the pot

If you’re a business owner, you probably already have some type of funding. However, you may reach a point where you need additional funding in order to grow your business. In this regard, taking out a personal loan is an effective way to supplement your current funding.


Go cashless, and keep your money AND your friends

It’s nearly festival season, and taking that much-needed weekend away with your mates just got a whole lot easier. Collecting cash for booking tickets, accommodation, common transport and toasting the good times with your friends – once a thankless chore that strained many a friendship – is now as simple as creating an instant messaging group.  

 Virgin Money’s P2P app, Spot, has a great new feature called Group Pay, which allows users to create groups of friends, name the group, and request payment. Once you know how big you’re going this year, you can set a budget. Then it’s as easy as splitting the amount equally, or allocating different amounts – and you can instantly see who has paid, declined or is still pending.

Festivals being what they are, chances are that at some point you’ll lose track of your spending. In the heat of the moment, you’ll probably borrow some money from a mate, and it will be #happydays for the moment.

Then before you know it, it’s back to reality. The next Monday arrives, and you have to pay them back. And none of the options are attractive.

Option One: get your friend’s bank details and go through the schlep of doing an EFT. Log on. Hope your computer is secure. Enter their details. If they’re with another bank, instant clearance is going to cost you. And is it even safe to share banking details nowadays?

Option Two: take time out of your lunch hour to go to an ATM. Stand in line. Pay withdrawal fees (for what, exactly?). Walk around with a wad of cash in your pocket, looking nervously over your shoulder the whole time. Make a special trip to give your mate the money.

Of course, there’s Option Three: ghost your mate. Ignore their increasingly desperate messages and avoid them like the plague. End up losing your friend over a couple of hundred bucks. Not a great option, either.

Luckily, there’s Option Four: the cashless, easy way. Take out your phone. Open Spot. Click your friend’s name and send them the money. No fees. No fuss. Safe. Convenient.

“It’s 2018, people. Cashless is king. We’ve got to take back control of our own money,” says Andre Hugo, CEO of Virgin Money. “Cash costs you money to draw, and it’s not safe to carry around. The cashless world is quicker, faster, cheaper and safer. And you get to keep your friendships intact!”


Download Virgin Money Spot and link your card now:

Being money smart in 2018? Cashless, mobile and stress-free

The next killer app is here – it’s called peer-to-peer (P2P) payments, and it’s made repaying your mates for Friday night dinner easier than sending a text message and cheaper than drawing cash from an ATM.


Want to send, or request, money? Simply add a recipient, enter an amount, press send and boom. It couldn’t be easier. There are numerous P2P apps available in the US and Europe, like Venmo and Zelle, but few in South Africa, apps like Virgin Money Spot are building a strong following of people who love the sheer ease of use and the social nature of the experience.

 “Cash isn’t king anymore. Consumers typically pay hefty fees to withdraw and deposit cash coupled with the risk of theft, whereas mobile transactions carry significantly lower fees and charges” says Virgin Money’s CEO, Andre Hugo.

Apps like Spot are changing the way we work with money. Use it once and you become a believer. All you need to make a payment is someone’s phone number – no banking details – and the more friends you have, the better the experience.”

 Spot’s latest feature, Group Pay, even allows users to create groups for specific events where you simply add friends, just like you would in a messaging app. Simply name the group – Ed Sheeran tickets, Youth party, Weekend braai bonanza – add a photo, and request payment from the people in the group. You can choose to split the amount equally, or allocate different amounts to specific individuals, and you can instantly see who has paid, declined or is still pending. Taking the stress out of friends or family owing you money.

 The most difficult part of using Spot? Taking 2 minutes to set it up. You download the app (super-easy). Verify your phone number and register your personal details (easy). Add your Internet-enabled card from any South African bank, enter a security PIN and go through the 3D Secure process. Then you’re secure, and ready to roll.

 Bonus: for every friend you refer, who registers, you both get R20. Get 15 buddies to sign up, and … you see where this is going. And you’ll never have to have those awkward conversations about who still owes money for the last dinner bill again.

Download Virgin Money Spot and link your card now:

Group Pay with Virgin Money Spot will make your bill splitting even easier

Virgin Money Spot is all about making payments between friends and family as easy as can be. With Virgin Money Spot, all you need to pay someone is their cell phone number and with zero transaction fees, you can Spot your friends as simply as sending a text message, without having to worry about the nitty gritty details of exchanging EFT details or paying unnecessary fees withdrawing cash at an ATM.

Now Virgin Money Spot makes splitting the bill and sharing costs with your closest group of people even easier with the introduction of Group Pay. Our group payment function lets people create a group and manage the payments for any occasion. How many times have you done something with a group of friends and you had to be the person to collect the different amounts of cash from your friends? Or even worse, you had to give them your EFT details and you can’t see which friend has paid you. With Group Pay, those days are over!

With the group payment feature you’re able to create a group, give it a name, a picture and a description. You’ll be able to tell people exactly why you’ve set up the group. You can add people to your group by searching in your contact list or by simply entering their cell phone number.  Within the group, you’ll be able to enter the full amount that needs to be collected or paid. Want to know the best part? You can either split the total amount equally between everyone in the group or you can individually assign amounts to people to make up the entered total.

Once you decide how much each person needs to pay towards the total, you can submit a group payment request to all the members. Everyone in the group will get a notification that asks them to either accept or decline the amount that you requested. If a group member doesn’t have Spot currently, then they will be prompted to download Spot before accepting or declining the amount requested. The great part is that everyone in the group can see who has and who hasn’t paid so that you don’t have to be the only person to nag the ones that haven’t yet paid.

This feature will take the headache out of collecting money for all those fun social occasions, taking away the awkwardness of having to chase people to square up what they owe. Whether you need to collect money for a weekend away, a gift or just to cover the cost of a meal between friends, Group Pay will make you the group hero.

Download Spot and link your card now:


Youth money matters: The low-down on your credit score and why it’s so important


Handling money, especially if you have just started earning can be challenging. There are so many things to take into consideration and understanding how to make the most of your money is one of them.  


When we talk about “score” it can be used in many different scenarios. We could be talking about a score on an exam paper or scoring the winning goal. However, there is a very important score that people don’t talk about as much – the score that assesses your financial history. Your credit score gives you a clear indication of how your finances are doing at the time.


You may be asking yourself, why is my credit score so important? Your credit score is not only so that you have a view of your financial history, but it’s also a way for banks and investors to gauge whether you’re a safe bet to loan money to. The actual “score” part of credit score refers to a 3-digit number that simply summarises all the information that’s in your credit report.


There is a very simple way to know whether you have a healthy credit score and as with most scores – the higher the better. The higher numbers mean you are more likely to be able to pay back your loan. There are many different elements that can affect your credit score, here are just a few of them:

  • How long you’ve had a credit history
  • The different types of credit you use
  • When looking at your debts, have you missed any payments
  • What limit you have on your credit card(s) and whether you spend close to this limit.


Another reason why your credit score is important is that banks and lenders could use your credit score to determine how much interest you should pay. For example, if you are looking to buy a car and you have a healthy credit score, you have a good chance of getting a better interest rate and you may even have more bargaining power over this interest rate, as you have a favourable credit history.


As you can see, ensuring you have a healthy credit score is vital for you for when you may need to loan money. If you’re nervous about your credit score, don’t worry, we have a handy tool that will get you a copy of your credit score and your credit report. The best part is that you can get one free credit score per year – pretty cool right?

You can get your free credit score here

Virgin Money continues to drive new digital-first innovations.

Virgin Money continues to drive new digital-first innovations, this time transforming the way customers buy car insurance 

Virgin Money South Africa, a registered financial services provider, has launched its Online Buying platform, giving consumers more innovative options when sourcing and securing car insurance. Customers now, not only have the option of using a call centre but can also go online and become fully insured in just 10 minutes.

“While many South Africans are used to direct engagement with a call centre agent, an increasing number of consumers prefer using online application tools. Virgin Money Insurance believes that customers should have the ability to choose the sales channel most convenient to them,” says Andre Hugo, CEO of Virgin Money South Africa.

This latest innovation addresses Virgin Money’s recent findings, which highlights that one of the biggest frustrations people face when buying car insurance is the feeling of being tossed back and forth within the context of a call centre. Some customers want to both source their quote and sign up online, then and there.

“Many customers find the standard call centre process involved in purchasing car insurance quite onerous. Even when they have the option of going online for a quote, they still have to wait for someone to call them back. We want to take the pain of waiting away from the customer, not only saving them time, but also putting them in control,” says Hugo.

With this in mind, Virgin Money Insurance now enables customers to go online and become fully insured – right from the request for a customised quote through to the actual purchase.

Virgin Money Insurance has set out to champion innovation within the insurance industry. Its car insurance is an innovative product in and of itself. It’s a value-for-money offering which not only provides customers with three simple price plans which are customisable to suit the customer’s needs, but also has a no-penalty clause. This means that if you are involved in an accident that is not your fault, you will not be penalised on your premium or forfeit your 10% cash-back bonus for your claim-free period, as Virgin Money Insurance believes it is not fair to be held responsible for someone else’s mistake.

The Virgin Money Insurance online offering is the latest innovation in Virgin Money’s  digital-first drive. Just last month it launched Virgin Money Spot, a ground-breaking bank agnostic, peer-to-peer payment application, which simplifies the way people exchange money by removing the hassle of having to exchange banking details to make EFT payments.

“Our digital-first strategy is all about making financial services products less complicated, more intuitive, ultimately adding greater value to the way people manage their money,” says Hugo.

Virgin Money makes EFT a thing of the past

Virgin Money Spot makes sending money between friends as easy as sending a text message, instantly and securely, no matter which bank they’re with.

Virgin Money, wants to change the way friends exchange money, with its innovative, peer-to-peer payment application, Virgin Money Spot.

Virgin Money Spot makes sending and requesting money from friends as easy as sending a text message. Users simply download the app, link their Internet-enabled card from any South African bank, enter a security PIN and exchange money with friends – instantly, securely and for free.

“We want to make sending and receiving cash simple. Now you can spot your friend for the meal you shared, or the bet you lost, or your contribution to the grocery bill. You simply spot them the money through the app and we transfer it directly from your bank account to theirs, no fees. It’s that simple,” says Zeyad Davids, CMO of Virgin Money.

“Virgin Money Spot removes the hassle of exchanging banking details for EFT payments and lets users send money safely by simply entering a phone number or tapping a name on their contact list.”

If a user’s card is linked to a bank’s rewards programme, they will earn points for payments made via Virgin Money Spot, as if they were using their card.

Every Virgin Money Spot user is issued with a unique code that they can use to refer friends. Each time someone registers using their code, they’ll both be rewarded with R20 from Virgin Money.

Virgin Money Spot is a 3D Secure payment solution that uses data encryption and PIN-protected payments to provide the simplest, safest and most secure experience possible. Users will only need to load their card details once and will then approve transactions with their unique PIN. They’ll receive notifications each time they make a transaction or are sent money.

Spot was developed in partnership with mobile software company, wiGroup, the largest mobile transactional platform in Africa that wants to simplify and improve the way the world transacts. Last week, it was announced that the Virgin Group had invested in the Cape Town-based firm, which will use the funds to fast-track its expansion into emerging and developed markets.

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