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Monthly Archives: June 2015

Easy2rent -R100 000 Million credit line facility launches “The Rental Revolution” – Changing the Way Landlords and Tenants Interact

The property market in South Africa at the moment is a cutthroat one.

Rental properties are in short supply, while the demand for homes is ever increasing as people struggle to raise the appropriate home loan to buy a property. This demand often leaves potential tenants arriving at a rental property only to find they are competing with 15 others, all applying for the same property to rent.

While this creates a difficult situation for potential tenants, landlords are forced to filter several applications trying to figure out who the “best” tenant might be.

Meyer de Waal, an owner of a rental property, recently faced this exact problem;

“I recently advertised a flat to rent and had 12 potential tenants all arriving at the same time, with 5 of them begging me to rent the apartment.”

Meyer was forced into the challenging task of working out who to rent the apartment to.

“I couldn’t judge the application on appearance alone,” Meyer went on to say. “ The risk of accepting a tenant on the spot, without first checking into their financial situation, ability to pay a deposit or references from previous landlords, is simply too great.”

The pitfalls of renting don’t stop with the application process.

Often potential tenants are required to pay an upfront rental deposit, of 1 or 2 month’s rental to secure the property. This leads to severe cash-flow problems for the tenant as they most likely paid a similar deposit on their existing rental property, which their current landlord will most likely only release 7-14 days after they have vacated the current premises.

“I recently applied to rent an apartment in Tamboerskloof,” Mandy B said. “I was asked to pay an upfront deposit of R20 000, equal to 2 month’s rent. The problem was my previous landlord only released my current deposit 14 days after I moved out of that apartment and it meant I had to have R 30 000 available as rental deposit, which included  one month’s rental payment upfront, to secure my new apartment.”

Starting a Revolution

The comprehensive revolutionary new service aims to solve this problem by:

  • Streamlining the entire rental process
    • Pre-approval and checking of Tenants before ever applying. This way landlords and agents not only get the best possible tenants but also cut down on the time taken to run all the necessary checks that usually occur after they receive an application.
  • Comprehensive Fulfilment Process
    • An A-Z process on-behalf of the tenant and landlord. Supported by a stringent due diligence process, each tenant is screened for credit worthiness and their monthly affordability, ensuring that their commitment to landlord can be kept and maintained for the duration of the lease agreement.
  • Rental Income Guarantee & Legal Costs cover provided, to ensure:
    • Rental to be paid on the first day of each month,
    • Rental income is covered for 3 months in case of default,
    • All legal eviction costs are covered, should one need to evict the tenant.
  • Deposit headaches solved
    • A Credit Line is available to raise finance for the required rental deposit and relocation costs for the tenant.
  • Lease Agreement
    • A comprehensive, fully compliant lease agreement is made available, underwritten by a trusted Rental Guarantee Company.

We’ve taken on board the best market leaders as partners to revolutionise the world of modern day property rental says Meyer. The leading peer-to-peer marketplace in South-Africa, backed by Barclays Africa, made available access to a credit line of R100 million to provide tenants with transparent and affordable finance, with personalised interest rates matching their affordability. The finance offered includes up to two months upfront deposit and the first month’s rent instalment as well as relocation costs.

A rental guarantee company with more than 12 years track record will underwrite and guarantee the landlord’s rental income for up to 3 months through the rental guarantee component, before the tenant takes occupation.

“We’re building the next generation rental marketplace, matching pre-qualified tenants to the criteria of landlords,” de Waal went on to say. “Both sides of the table are protected and taken care of as our entire process is frictionless, cost effective and sustainable to the property market.”

This revolutionary service offering relieves both the tenant and landlord of their financial, administrative and practical concerns in a way that simply isn’t offered by the current market.

What About Buying?

There is always an ambition to buy one’s own home and we assist to realise this.

Many tenants rent with the dream to buy their own home at a later stage, either once they have raised enough money for a deposit or they simply need time to improve their affordability or credit score. As an additional value-added service, aspiring home buyers subscribing to the offering will also be supported to prepare themselves to buy their own home in the future.

The tenant rents the property first, securing the option, over time, to buy the property. The product also facilitates the opportunity for a tenant to build up a deposit from a portion of the rental paid and the track record of the tenant is used to support his home loan application, at the end of the Rent2Buy period, to support the home loan application.”

“Rent2Buy is essentially buying a property by renting it first,” Meyer says. “We work with the seller and the potential buyer, helping both to achieve their goal.

For more information contact Meyer de Waal 021- 461 0065 or meyer@budgetfitness.co.za

 
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Posted by on 26/06/2015 in Content

 

13 reasons why good people have bad debts

13 reasons why good people have bad debts

Susan Erasmus FIN 24
2015-06-14 17:12
 
 Cape Town – No one ever plans to fall into a debt trap, like no one ever plans to become a drug addict. But sometimes tough things come your way and the next thing you know, you are up to your ears in debt.

Here are some of the main reasons it happens:

Easy credit

If you have a job and a clean credit record, the amount of credit you can get is quite staggering. If you already owe thousands you won’t pass the affordability assessment, but if your record is clean you can open any number of shop accounts or credit card accounts. Often shops will lure you with vouchers or discounts, or an offer of a new credit card will arrive just when you badly need some cash. It’s so easy to think you’ll do it just this once.

A lack of financial understanding

Many people leave school without really knowing how budgets work, what interest is, and what the difference is between good debt and bad debt. People learn the hard way when they suddenly realise how expensive life can be and how very big the difference is between what most of us want and what we can afford.

Signing surety for someone else’s loan

It’s different if it’s your child’s student loan, but think twice before signing surety for a friend’s business loan, or for a cousin’s home loan. Yes, you want to help, but many people have been plunged into financial crisis when they had to foot the bill when the friend’s business went under or the cousin lost his/her job. Don’t sign surety for any amount that you could not afford to lose.

Info hidden in the small print

People sign papers because they want the TV or the fridge now on hire purchase – but they don’t realise that they will be paying so much more for it than if they had bought it cash. How many people can really tell you what the difference is between an interest rate of 20% and 30%? They have a vague idea, but when it comes to actual figures the details are blurry. Some loan sharks also specialise in hiding horrible realities in small print – and pressurising people into signing documents quickly without being given the opportunity to read all of the contents.

Lack of financial management

If you’re working without a budget, there is little distinction for you between essential and non-essential spending. You just spend until it’s finished and then you use your credit card or your shop account to get by until payday. Within a year, this can build up to a huge amount of debt.

No distinction between wants and needs

It’s a human thing to want to treat yourself – especially on payday. But if it carries on throughout the month, red flags should be going up. It’s a need to get to work every day, but a new car is a want. Lunch is a need, but sushi is a want. If your state of mind depends on buying ongoing luxuries, very soon you could be in a situation where essentials go unpaid and you’re sitting on a mountain of debt.

Worrying about your social status

Watch the ads on TV: according to them there is a simple correlation between happiness, social acceptance and the purchasing of certain goods/services/luxuries. If you are status-conscious you are a sitting duck for any advertiser, as you will buy anything to impress others and convince yourself that you are acceptable. Buying goods on credit to show off is a sure and quick way to gathering debts.

Dodgy investments

Many retired people fall victim to investment scams because of the promises of high returns on their money. Just don’t go there. Check the financial credentials of anyone trying to sell you a high-return investment (and the fact that he is a deacon in the church is not enough). The last thing you want when you should be enjoying your retirement is to be dodging creditors.

Lending money to friends or kids

If it’s once-off in a crisis and the amount is not too staggering, then maybe you can do this. But not if it is ongoing and the person has not repaid the money they borrowed from you last year. Emotional attachments and cash do not make for a healthy mix. You might never see your money again and have strained relationships because of it.

Medical expenses

Few things can cause as much damage to your bank balance as medical expenses, especially if you have no medical cover. Even a fairly minor operation could set you back tens of thousands of rands. In short, if you’re not prepared to use state hospitals, you need to have at least hospital cover. Paying for private medical care out of your own pocket could create the kind of debt from which you may never recover.

Family events

A wedding, a honeymoon, a funeral: all of these are extremely expensive, especially if you aren’t prepared to do it on the cheap. Everyone wants to go bigger and better and are afraid that if they don’t, the family will gossip or look down on them. In short: let them. If they are measuring you by such superficial things, how much value should you be attaching to their opinion anyway? You don’t want to still be paying off debts years after everyone has forgotten the designer wedding dress.

A sense of financial entitlement

Some people feel that the world owes them a certain standard of living. Uhm no, it doesn’t. No one is automatically entitled to anything just because they think they are. If you can’t pay for it, you can’t have it. And don’t expect others to foot the bill, either. Just because you grew up in a two-car home doesn’t mean that is what you deserve to have. Expectations should be adapted to individual situations. Not always an easy thing to do, I know, but the alternative is a life of crushing debts.

Sudden job loss

A sudden retrenchment can wreak havoc on your finances. It is difficult to plan for possible periods of unemployment, especially if you are barely getting by on your salary. A sudden loss or change of income is often the start of a debt problem. Being flexible and adjusting your expectations radically could be your only option.

 
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Posted by on 15/06/2015 in Content

 

Loans to friends and the National Credit Act

LENDING TO A FRIEND: THE R7 MILLION, THE LAW, AND THE RISKS

Of the many potential pitfalls inherent in making loans to friends, one of the more dangerous (but lesser-known ones) is that presented by the requirements of the National Credit Act (NCA).

It’s a serious risk – failure to comply with the NCA’s many requirements exposes you to substantial losses, including invalidity of your loan agreement and the possibility of losing all your rights of recovery.

A recent Constitutional Court judgment illustrates the point.

The facts

  • A Namibian farmer lent his friend R7m for property development in Cape Town per three written loan agreements
  • The lender wasn’t registered as a credit provider at the time as required by the NCA
  • He wasn’t in the business of providing credit, was unaware of the requirement to register and had no intention of violating the NCA
  • When the dates for the repayment of the loans had passed, the borrower was unable to pay, he accordingly advised the lender who then applied to the High Court for sequestration of his friend’s estate.

The law

The NCA provides that –

  1. You are required to register as a “credit provider” in any of a variety of situations set out in the NCA. In this particular case, registration of the lender was required because the amount of the loan exceeded the set threshold (currently R500,000)
  2. It is irrelevant that the borrower is a friend – what counts is whether the loan falls within the definition of “credit agreement” and whether the parties are “dealing at arm’s length”
  3. If you fail to register as a credit provider, the NCA as it stands compels courts (they have no discretion) to both –
    1. Declare your agreement void, and
    2. Order that your right to reclaim the loan be cancelled or forfeited to the state. It is this cancellation/forfeiture provision that was under scrutiny in this case. And, as ruled originally by the High Court and now confirmed by the Constitutional Court, it is invalid – unconstitutional for breach of our Constitution’s prohibition against “arbitrary deprivation of property”.

The practical effect of that ruling, and a warning

In practice, until the invalid cancellation/forfeiture provision is amended, the common law will apply. What that means is, as the Court summarised it, that unlawful agreements are still void, but “the credit provider would be able to claim successfully from the consumer on the basis of unjustified enrichment, if the requirements of the action are met. This could include the consideration of the circumstances of each case and especially the degree of blameworthiness of the unregistered credit provider, in order to reach a just outcome”.

The critical issue is that – if you are obliged to register as a “credit provider” in terms of the NCA – you should do so. If you don’t, your agreement is void. And, although now you can at least ask a court to exercise its discretion to allow you to recover your loan, the court may well decline to do so – in which event you will lose everything. There are grey areas here so take advice in doubt.

A further practical issue is that even if you succeed in court, you could still lose everything anyway. As happened in this case, if your friend is bankrupt you are left with a (probably worthless) concurrent claim against his/her insolvent estate.

Perhaps avoid all that by heeding Shakespeare’s warning: “Neither a borrower nor a lender be; for loan oft loses both itself and friend”.

Thanks to attorneys Loubscher vd Walt

 
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Posted by on 01/06/2015 in Content

 

Why you should know your credit profile

Cape Town – At some stage in just about everyone’s life, they are going to apply for credit: you may be buying a house or a car, and you are applying for finance. Here’s why you don’t want to get a nasty surprise.

Many people only find out that they have been blacklisted once they apply for credit. To be blacklisted means there is negative information about your debt repayment history on your credit record. This could deter potential creditors from lending you money, or letting you open an account.

You may have moved, and never received the mail, or you could have overlooked a small account, or simply forgotten about it. People tend to think of troublesome debts as the big ones – you are just as likely to be blacklisted for a small outstanding amount, as for a big one. Imagine having your life turned upside down for an outstanding bill of R160. It happens.

Every person has the right to a full, free credit report once a year. This can be a very useful thing to have.

Only once you are in possession of your updated credit profile are you able to determine if the information which the credit bureaus have listed is in fact correct. In the case of something such as identity theft, people get a nasty surprise when they are blacklisted for an account they never opened.

It is also possible that a mistake has been made and that an account, for which you have been blacklisted, is actually paid up. But then you might really be in arrears on accounts – in which case the blacklisting probably won’t come as a surprise to you.

Because of these factors you could be unaware of negative information on your credit profile which could be hampering your chances of getting credit when you really might need it for something such as a home, or education.

The problem with being blacklisted is that it could taint your credit profile for between two and five years and credit providers will see you as a high risk, and are likely to turn down your application.

You could be blacklisted for the following reasons:

  • For not making scheduled payments on accounts that are in arrears (if, for example, you have signed an agreement to pay an extra R400 per month on your bond to play catch up, and you fail to do so). In such a case legal action may not yet have been taken.
  • The company you owe money to has handed you over to a legal firm, because you have not paid your accounts on time. Don’t forget, that even at this late stage, you can still negotiate payments. Failing to pay an account could lead to a legal judgment against you. (An outstanding judgment means the person who lent you the money can hold you accountable for thirty years – with interest.)
  • If you have paid your account in full, but not according to the original time frame, your creditors can leave this information on your credit profile for two years.

A word of warning: take great care when applying for credit at institutions or businesses who say they don’t mind if you are blacklisted. Factored into your repayment schedule will be the reality that some of their clients won’t pay them back. You could find yourself paying a fortune for other people’s bad debts.

Here are the telephone numbers of some large credit bureaus.

Trans Union – 0861 482 482
Compuscan – 0861 51 41 31
Experian – 0861 105 665
Consumer Profile Bureau – 010 590 9505
Credit Watch – 011 483 0086

Moeshfieka Botha

 
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Posted by on 01/06/2015 in Content

 

Avoid being an ATM on legs

Cape Town – Your friend is struggling and you have some cash available. Should you lend them some money, or are you putting the friendship at risk?

Everyone has been in that awkward situation: your friend needs some cash right now and he has asked you to help out.

There are a few reasons why people do this:

– It’s a friend in need and they feel they should help;

– They don’t want to risk the friendship by refusing;

– The person is really in dire straits and has nowhere else to turn to;

– You don’t want to look as if you distrust your friend and don’t believe their promises of paying you back;

– You feel guilty because you have so much and the friend has so little.

All of these reasons convince people they are doing the right thing. And some friends are reliable and do pay you back when they say they are going to. And then there is the rest.

Remember there is a huge difference between buying someone a hamburger and lending them the deposit for the flat they want to rent. But be wary of the friend who always forgets their wallet at home, or conveniently doesn’t remember that you paid for supper the last time you went out.

WATCH: Heroic escape from the pit of debt

Friends and money generally don’t mix, as many people have found out the hard way. Here’s why:

Only verbal

Promises to pay back the money are often open-ended and only verbal. It feels awkward to make a friend sign a contract, so many people just take the borrower’s word for when the money will be returned. Which is often never.

Not a priority

Paying a friend back is not a priority to many people. There are always more pressing debts, such as the rent, the car payments, school fees and so forth. The loan from the friend moves to the back of the line – again and again.

There are no real and immediate consequences to not paying the friend back, except a slight social awkwardness and many people don’t mind that all too much.

No interest

You get no interest. Few people would charge a friend interest on a loan, but that same money, if invested elsewhere, could have earned you interest.

Social impact

The unpaid loan becomes the elephant in the room. Social occasions become awkward, especially if you see the person spending money when they still owe you cash. It’s also difficult when they just never mention it, because you feel like a nasty person when you ask when they’re going to pay you back.

Misspending

Your money might get misspent. Instead of using your loan for something necessary, you could find out it was splurged on a night out on the town. This could make you feel incredibly resentful, as you have been misled and feel like a fool.

Ruining the friendship

It could ruin the friendship. An unpaid loan can spell the end of a friendship, as resentment builds up on both the part of the lender and the borrower.

The borrower may feel embarrassed, or might feel resentful as he could feel the lender doesn’t really need the money back, and the lender feels he has been taken for a ride. Unpaid loans can destroy the trust on which friendships should be based. Social awkwardness can make these two former friends avoid one another after the loan incident.

Just an ATM with legs

A second request is insulting. If the first loan has not been paid back, and a request for a second one is made, the potential lender can feel that he or she is merely seen as an ATM with legs – not a good basis for a friendship.

Good friendships are based on respect and equality and unpaid loans can make these two things disappear.

Tough love

All you wanted to do was help, but you could be enabling the friend. A once-off crisis is one thing, but an ongoing saga of woes quite another.

If your constant bailing out of your friend is stopping him or her from taking responsibility for their own life, you are enabling their irresponsible behaviour. It might be time for some tough love.

Short on cash

You could become short of cash yourself. Your car’s gearbox could need replacement and you could suddenly really need the money you lent to your friend. Pressure to pay back a loan is seldom received well.

Power change

Unpaid loans can subtly change power relationships. People do not enjoy feeling indebted to others, and it could make them resentful – or even jealous of their friend’s better financial situation.

If you owe money to someone, you also don’t feel that you can turn down any of their requests or social invitations.

In short, it is never a good idea to become the unofficial money-lender of your circle of friends.

Simply say your money is on a 30-day call account and not readily available, or tied up in investments, and that you are living on a tight budget. That is, unless you want to lend money to a specific friend for a specific reason.

But don’t be shy to ask them to sign an IOU – say you have had some bad experiences before, and use that as an excuse. But it’s not a good idea to make a habit of it.

Some people go as far as saying that you shouldn’t lend money to a friend unless you are prepared to give it to them. But few people have that sort of cash lying around.

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Disclaimer: Fin24 cannot be held liable for any decisions made based on the advice given by debt experts. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

 
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Posted by on 01/06/2015 in Content