New credit act

[IceCreamMan]

as most of us finance our scoots , what is the gist of this new credit act effective on 1 june and how does it affect everyone applying for credit ?

cheers

[Grootseun]

Im not sure how it affects my scooter, but it will mean that i will not be nagged by credit card companies offering me more credit on an already over strained budget.

If they use the act correctly, i will not be able to get any loan/credit due to my financial status. it's good news, as my instant gratification spend now worry later appetite will not be satisfied.

Credit is evil, and i for one am unable to help myself when it comes to spending the banks money..i am better now.. and soon will be free of the bloody credit cards..

[JourneyMan]

Just a general point or two as I have it.

Turn around time on deals/transactions will take longer. Gone is the within 24 hours finance approval. Banks/lenders must do proper procedures which show the client can afford the credit.

Defaulters get more protection, aka, more time and additional avenues (Debt Councilor) before the institution can start legal proceedings. Gone is the burley, hairy debt collector threatening to cut out your balls if you don't pay. (Although I strongly suspect that practise will continue, somehow)

Gone is that abhorant practise of "I send it to you, unsolicited (Sp), you did not return it within the time stated, you now must pay or you get black listed".

In short, more protection to the consumer. Your rights as client get more. Paperwork must be such that the layman can understand the provisions of the agreement, cooling of periods, maximum interest rates on classes of loans etc.

All a good thing IMO.



I'll  rather go drink a beer now before I get carried away again on the issue of debt/credit.

[krazy-eyes]

what act?
huh?

what does it stipulate? (in leymans terms please)

[gonedown]

ICM - no matter what forum, may answer stays the same!

[michnus]

Aaaag not much. Only important thing is the nanny state now owns your ass and credit.
Your credit granter will now decide after months of searching for all your credit if you can afford another R50000 bike. So it actually made life much easier for all of us.
You give them your lifes info and they chop chop decide if you can buy some stuff.

Other than that and o ja properties, will also be out of reach for most people, we now have most stuff done for us.

[IceCreamMan]

ICM - no matter what forum, may answer stays the same!

thanks ppl...

gonedown, i am being hassled to hurry an sign on a deal before friday an this new act comes into play....i suspect i might be better off interest rate wise to hang on a bit ...if the credit granting is being tightened up a bit it may force the bank to be a bit more aggresive with their terms an rates...i try to buy cash wherever possible but sometimes i like to lean on the banks a bit

[michnus]

ICM don't bet on that happening. Gutt feel says you gonna loose this one

[LuckyStriker]

My bank offered me a free second bond on my house
I had to hurry to accept it because from the 1st of June loans will be given out based on surplus money, not gross income.

It's nice to get something for free from the bank. Obviously if I ever touch the money, I'll be killed instantly by the bond repayments :shock:

[bud500]

Just as a note. Deals will have no reason to take longer, yes the responsibilty will now fall on the credit giver to ensure the client can afford a loan but this can still be done in 5min with the use of current technology.

Regarding interest rates, this will not affect most people on this site. There will now be a 38% per annum interest rate limit. Mostly to protect the clients of microlenders who were paying between 75% and 380% per annum.
As you can see this limit is still way above current credit card rates.

[gonedown]

ICM - no matter what forum, may answer stays the same!

thanks ppl...

gonedown, i am being hassled to hurry an sign on a deal before friday an this new act comes into play....i suspect i might be better off interest rate wise to hang on a bit ...if the credit granting is being tightened up a bit it may force the bank to be a bit more aggresive with their terms an rates...i try to buy cash wherever possible but sometimes i like to lean on the banks a bit

ICM - not sure if they will give a better rate - no reason to imho.  May even be stickier about rates if the total 'basket' of available loan seekers drops. Probably only after some time this might force them to offer slightly better rates.  Difficult to say.  What may happen is that you qualify now, but not from 1 June?  ...or you may have to provide more info before getting the credit - ie more frustration.  :?

[chris g]

Loan applications will now take into account your current debt and credit that is available to you, for instance if you have a credit card with a limit of R50 000.00 and you have only used R5000.00 the available credit  be added to your current debt

[bmad]

The main purpose of the NCA is to curb reckless lending. This includes the elimination or regulation of the micro lenders who are a major force in the low income bracket.

Other notes:
- to try and stop consumers from getting into too much debt
- those that have too much debt, to assist them to get out of it through counceling and debt management (rather than blacklisting)
 - Lenders (Banks and finance houses) will be penalised if they are found to have entered into lending agreements that are deemed to be reckless
- The onus is on the lender to ensure that they are doing the right thing
- Not allowed to discriminate in the application process

There is plenty more, but these are the important parts to know.
Credit applications will not take longer, the lender just need to be more thorough in his actions.

Hopefully we will see positive results in a couple of years, so it could be a good thing

[IceCreamMan]

    typical banks ...well at least this will change from tomorrow.

Thanks for the feedback all.... by the sounds of it this could be a good thing for ppl who cant control their finances...i know when i started out in working life it would have been good to have someone watch my "credit" back so to speak.... got me into much trouble in my early working life ...spend spend spend with a devil may care attitude.

cheers

[michnus]

And this negative is, spending for the economy is going to slow down, people with financial savvy is dictated to under this act which is not always good for economic growth.
It also means when they work on nett income and not gross that many home owners will have to buy cheaper houses now which in itself will have an impact on property prices.

To protect the lower need of the market and financially challenged people yes it's brilliant, but for the economic active entrepreneur its tuff business form now

[droffarc]

My bank offered me a free second bond on my house
I had to hurry to accept it because from the 1st of June loans will be given out based on surplus money, not gross income.

It's nice to get something for free from the bank. Obviously if I ever touch the money, I'll be killed instantly by the bond repayments :shock:

You may just regret accepting that unless you can use it on more than just the home.

As I understand it even if you just have eg. an overdraft facility of say R10,000 then when you apply for credit for say a new bike financed by another bank they take the bond as being outstanding debt so your affordability is affected even if you do not have a current overdraft - because you can use it. They can only use 25% of your Netttt (after all deductions for beer and pretzels, milk bread and blankets and blades) spendable income.

Credit granters must now act as consultants to borrowers.

Hope that made sense :?

ps. in other words the bank now has a captive market - you can only borrow from THEM  

[durbandave]

The new NCA has already put serious brakes on my income as there has been a BIG slowdown in the number of instructions we get from the banks. So for me personally the NCA is BAD.  

I was at BMW yesterday and the salesman said to me that there are some advantages. You no longer need a deposit (they have ensured that you can afford it so they do not need you to put your own money in to encourage you to keep paying). The repayment terms on a bike can now be up to 72 months (thats like 6 years to pay off the bike)

So then, as long as you can show that you can afford R 1453 per month (based on 12.5% althought in reality will probably be around 15%) over 72 months you can buy a R 100 000 bike out the box. At the moment, the same bike (at 12.5%) will cost you R 1932 per month AFTER you put down 10% (R 10 000) deposit.

This may even work better for some people as having a 10% or 20% cash deposit is normally difficult. As long as you can show that you can afford the payment (and no ITC and stuff of course) you can buy that bike you always wanted.

Of course bikes financed at 100% have higher settlement figures which is going to make trade-ins and selling out of hand - the whole second hand market in fact - a very interesting place.

[michnus]

Now only if they would give 100year bond terms like the in Hong Kong and were are in for a good rentals

[durbandave]

I believe that long-term or life-term bonds are going to be the next thing. Given that a very simple and average house will cost you around R 750 000 in most big cities, you would need to have a disposable income of around R13 000 AFTER all other costs and deductions which means you would need to be pulling around R 60 000 per month salary.

I reckon life-bonds are around the corner. Basically the bank gives you a loan to buy the place (say R 750 000) and you pay it off over the balance of your life (say 30 or 40 years). If you do not reach the end of the payments they can take back the house (without the legal / court / summons /sherriff route) or your surviving spouse or kids acn take over the payments. It is sort of an interest only payment that you make. The good thing is that for poorer people they will the qualify for the installment.

Although interest rates are much higer on life-bond, it is still cheaper than the conventional 20 year mortgage. Installments on a R750 000 loan would probably be in the region of R 5000 over 40 years (remember this is interest only) At the end of the term, you must sell the place or negotiate a new deal.

[Kev]

Damn, this financing stuff sucks you dry. SIX or SEVEN years to pay off a bike? DAMN!  :shock:  Never mind the "bond for life" on a house you will never own.  :shock:  Sounds to me it is all going wrong for the man on the street... and very ok and right for the insurance and banker man.