Applying for loans is something which should ideally be done after you have done the required research in to the lender. Borrowers also needs to ensure that they assess their own affordability before applying.
According to the National Credit Act, lenders are not necessary for law, to evaluate affordability of the borrower before providing access to credit. Affordability is measured by net disposable income. This is calculated by using the applicant's gross income, net gain and fixed monthly expenses.
If monthly repayments exceed one third from the applicant's net monthly income, affordability may be declined.
Why loans declined because of affordability may be a good thing:
As financing applicant, you need to be able to afford to make repayments on the loan you're trying to get. It's your responsibility to make sure that you assess your affordability before you apply.
Keep in mind that the more disposable income available, the much more likely the loan is to be approved. In case your application is declined, you need to go like a sign that you may be over-indebted.
You can then go ahead and take necessary steps to ensure that you pay your debts off. Reduce your debt whenever we can.
In South Africa, where over fifty percent from the 22.5 million credit-active consumers are over-indebted and have impaired credit records, lenders are actually necessary for law to assess affordability before granting credit.
Loans declined due to affordability can be a good thing in this case. By doing due diligence credit providers might be helping towards increasing the credit rating of many applicants.
Loan applicants who are declined use of credit may do the necessary work to ensure that they improve their credit records by fully repaying outstanding debts or reducing debts where necessary.
