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FINANCE: Credit Worthiness Also A Victim

 



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With Absa reporting an 80% increase in house repossessions when comparing January 2008 with January 2009 and FNB selling 286 homes in March this year compared to 100 houses sold at execution in March 2008,  one of the issues often overlooked is the fact that the homeowners in many cases are likely to get adversely listed or listed as problem payers.

This makes it difficult if not impossible for them to obtain new credit said Fred Steffers, managing director of the Consumer Profile Bureau, South Africa’s most comprehensive source of credit information.

“Most consumers do not understand the vital necessity of maintaining a healthy credit record which will allow them access to further lines of credit.

“Instead of waiting for the bank to reposes a house or a car, every attempt should be made to sell it privately in order to avoid being adversely listed,” Steffers said.

The latest figures released by the National Credit Regulator shows that at the end of December last year, the number of borrowers who were more than three months in arrears had surged 14 percent year on year to 7,3-million.

“This means in real terms that 42% of the 17,5-million credit-active consumers are more than three months behind with repayments and the situation is likely to get much worse before it gets better,” he said.

The credit crunch has hit home for motorists and new vehicle dealerships and even historically credit-worthy individuals on the hunt for new vehicles have been turned down by banks and financiers.  This is the word from car dealerships throughout the country.

Several Pietermaritzburg dealer-principals, said the combined KZN midlands market in 2008 was down 26% year on year, compared with the national market’s slump of only 21,1%.

Parts of Gauteng have been hit even harder with some dealerships recording more than a third less sales than the same time last year. Many have simply closed their door and left the industry, Steffers said.

Dealer-principal of Datcentre Pietermaritzburg, Matthew Holmes, said approval ratios of the banks are down to as low as 13%, from a high of about 70%.

He estimates that as many as half of local credit-worthy individuals who would ordinarily receive loans are now being turned down at their first attempt.

Some dealerships are taking advantage of the situation by making use of private financiers who charge much higher interest rate and hefty deposits..

“Microlenders have never had it so good because customers who have been turned down by banks are often still acceptable to microlenders and they are undergoing something of a mini boom, despite their much higher interest rates,” Steffers said.

Marcel de Klerk, chief executive of Absa’s vehicle and asset finance division, was quoted as saying that an estimated 6 000- to- 7 000 vehicles are being repossessed every month in South Africa.


 
 
 
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