Blacklisted Loans South Africa
Blacklisted Loans

Blacklisted Loans South Africa

May 11, 2024

Key takeaways:

  • Approximately 5.6 people are blacklisted in South Africa due to poor credit history or irresponsible payment-making.
  • Blacklisted loans usually come with high-interest rates as compared to other credit products.
  • Loans for blacklisted come with a shorter repayment period of up to a few weeks then they are paid in full.
  • Taking out blacklisted loans and paying them back on time may improve a bad credit score.
  • There is a high risk involved with blacklisted loans to borrowers.
  • People typically apply for blacklisted loans because their loan approval chances are high in emergencies.

What is a blacklisted loan?

In South Africa, generally, the term blacklisted is old-fashioned, which doesn’t exist, and credit bureaus don’t use it. But there is a common belief to have an adverse credit record or else such borrowers are marked as high risk.

Nearly 65 million South Africans are blacklisted at credit bureaus XDSTransUnion and Experian due to making irregular payments. Apart from that, having poor credit and leaving the payments in between cause blacklisted.

Although the blacklisted loan is a small type of short-term loan which usually paid back on your next payday with high-interest rates. You can get these types of loans directly if you have met with some unexpected emergencies requiring small amounts for their removal.  Generally, these loans are for a limited period and are used to cover unexpected expenses.

How do blacklisted loans work in South Africa?

Whenever you’re applying for blacklisted loans, then these loans are directly paid into your bank account the same day. Such loans are due on your next payday, or further fees or other costs are imposed.

You can also write a cheque to your lenders in advance, which will stay with them until your payment date arrives.  If you have no money in your bank account to pay off your current loan, then some additional fees will continue accruing to your bank account.

Thus, you need to assess your loan repayment ability before applying for these loans so that you don’t have to bear the consequences of not making payments on time.

Pros and cons of taking out a blacklisted loan

What’s good?

  • Fast access: You can get fast access to blacklisted loans because some specialized lenders make haste in your application process. You can get the funds in several hours to meet your needs.
  • Minimum requirements:  Generally, blacklisted loans have some basic and minimum requirements than conventional loans being offered in South Africa. Sometimes, a good credit score won’t be a part of the problem.
  • No collateral: Blacklisted loans are unsecured loans that don’t require any valuables from borrowers in exchange for getting some extra funds.
  • No paperwork: There is no paperwork associated with these loans since the process is online-based, which takes less time to complete.
  • Quick funding: Borrowers can get quick funding access once direct lenders approve their loan application.

What’s bad?

  • High-interest charges: Blacklisted loans are more expensive than traditional loans in terms of high fees and interest rates.
  • Lead to debt trap: These loans can trap borrowers in a debt cycle if they are not severe about loan repayments.
  • A small duration & hidden fees: Blacklisted loans usually come with a small duration of up to a few weeks, and many traditional lenders charge hidden fees too.
  • Addiction: Borrowers might be tempted to use these loans without emergencies. If not used appropriately, this can propel them into a financial problem.

Alternatives to blacklisted loans in South Africa

You can also consider some alternatives too at the place of blacklisted loans if you are in a hurry for some extra funds during a cash shortage.

  • Cash advance from credit card: Many credit cards offer cash advance, which means you can withdraw cash against your limit. You can use this feature if you have maintained your credit history and have an ATM nearby.
  • Payday loans: You can go ahead with blacklisted payday loans if you are short in cash to remove sudden financial challenges with lump sum loan amounts. Remember, these loans are based on small duration with high-interest rates, so make sure you can afford their payments before applying.
  • Approach credit union: Credit unions work as a community, but they are the best alternative to arrange some funds at lower interest rates. You can also experience flexible terms and conditions even if your credit score is terrible.
  • Reach out to friends: Borrowing some funds from friends can be the best alternative, which can be affordable to your pocket. But make sure to pay back their money on time, or else long-time relation might be affected negatively.

How to make the best decision for you?

You should consider several practical tips before applying for blacklisted loans which include how to choose them with perfect guidance. 

  • Focus on your needs: Before you get into the majority of options, you need to understand your needs so that you can accordingly apply for the loan amountYou should be aware that they are not for free. Thus, choose the loan amount wisely.
  • Check approval rate if possible: Many lenders contend they have high acceptance rates. It can be a good beginning to offering a loan with a high approval rate by loan companies to borrowers whose application was denied elsewhere. So, you need to confirm your lender is trustable.
  • Requirement types: Requirements depend from lender to lender. Despite that, some lenders offer short-listed loans at limited requirements so borrowers can easily overcome sudden emergencies.
  • Do research: You are required to do research in online marketing because different lenders offer loans under their company policies. Whichever suits you the most, you can choose a Loan Company accordingly.
  • Check reviews:If you check out the reviews of existing borrowers, you can clearly illustrate a lender’s trustworthiness based on their past borrowing experiences. So, it would help if you didn’t neglect it in any circumstances.

Are blacklisted loans every worth it?

Whether blacklisted loans are worth it or not depends on an individual’s personal situation and requirements of funds because borrowers apply for loans under different circumstances.  For example, if you need funds in advance and can’t qualify for a loan from conventional lenders because of your bad credit history.

Then the blacklisted loans can be the right choice for you, being the only option which will sail you through the financial ditch. Still, it would help if you made sure of the terms and conditions of the loan agreement and interest rates and understand repayment policies.

Frequently asked questions

How to apply for a loan if you are blacklisted?

It might be tricky to apply for a loan when you are blacklisted, but not impossible. Some specialist lenders take the risk and approve loans. The most popular options include payday loans, blacklisted loans, secured loans, and adding a co-signer.

Does old mutual offer loans to blacklisted?

No, old mutual doesn’t offer loans to people who are blacklisted because they consider them as high-risk borrowers.

Can you get a payday loan with a blacklisted status?

Yes, you can get approval for payday loans even if your credit score is low, bad or come blacklisted. Usually, payday lenders focus more on your repayment ability than your past credit rating. Remember, you have to pay more interest rates and fees.