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DREAM PAD: The NCA has pressed on banks to tighten their lending control measures when granting home loans. That makes it harder to secure credit.

Soweto's Ndingilizi Mkhwanazi is one such consumer who is convinced the NCA is too harsh since she has been unable to secure a home loan though she is able to repay her debts without much trouble.

Legal and Tax Services, legal manager at Yusuf Boda says if consumers understood how the NCA process worked, they  could navigate the law in a way that empowers them  to get a loan they can afford to pay off.

Boda says the NCA falls in line with the government's drive to strengthen protection for the man on the street.

The NCA forces banks to be transparent about their reasons for granting or not awarding a loan and seeks to prevent irresponsible or predatory lending, Boda says. 

"These are all legal protections that one did not have in the past. In practical terms, the act also means that ones creditworthiness and indebtedness are looked at in a slightly different manner," he says.

In the past, Boda says, banks would evaluate your credit record, income and the property you wanted to buy to establish whether to grant a loan to you and the size of the loan. They would score your creditworthiness using their scoring tools.

That has not changed much, but the NCA demands that a bank does an even more stringent evaluation of an applicant's spending and payment habits history to gain a clear picture of what his/her level of indebtedness is, Boda says.

"That process aims to determine how much more debt you can afford to pay off," he said.

Boda says the  major change the NCA brings is that lenders must now look at consumers' disposable incomes when making decisions about awarding credit.

He says lenders previously looked at gross household income, with 30% of the income being generally accepted as the ceiling the debt applicant could afford to carry.  

But now consumers will not be able to secure a mortgage that exceeds their  disposable income.

He said: "The aim of the NCA is to protect you from becoming over-indebted. If you have multiple open accounts - such as other loans, credit cards or store accounts - the monthly repayments could mean that Mkhwanazi failed the affordability test for the home loan. As a result the bank might offer you a smaller home loan or decline your loan altogether.

"To maximise your chances of securing your loan be sure to pay off [as many] of these accounts that you can before submitting your home loan application to the bank."

Boda says if consumers can afford the loan they are applying for and have an untainted credit history, the NCA should not have too much of a negative effect on their application.

"Sure, the approval process takes a little longer than it did in the past. But securing a home loan is something best done slowly and carefully in any case," Boda advises.

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Fri May 24 23:25:45 SAST 2013 ::

Jul 31, 2012

imd

Missed out on a house boz of thi..........cr@p!
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Jul 31, 2012

tpaz

NCA is good, it is protecting us. We like eating what we can't chew.


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Aug 1, 2012

Traveljunie

nanny state BS, gov wants to protect us, what a laugh.
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Aug 1, 2012

Reyavaya

@tpaz
NCA is good, it is protecting us. We like eating what we can't chew.
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That is so true people end up @ Debt Counselling and that's where their lives get messed up.
People drive fancy cars and lived in fancy townhouses and come month end "Ke mokoti bulega ke ipate"


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