Your Loan Application is Influenced by These 5 Things

Everything that we need nowadays is at our fingertips and loans are no different. You can apply for a loan in just a few minutes online and from anywhere at any time. 

Even though the process seems to be simple and convenient, you will only be granted a personal loan if you satisfy the qualification criteria. If you do, then you could have your personal loan in your bank account within 24 hours. 

There are several factors involved as to whether your personal loan will be approved or not. Here are the 5 things that will influence your loan application. 

Paying Your Debts on Time

When you pay your debts on time it shows that you can manage your debts and could be in a position to take on credit. If you are late with payments or if you miss payments, then the loan provider may see that you are struggling to make ends meet. This could lead to your loan application being rejected as the loan provider sees you as a risk and you can’t handle any more debt. 

A Large Chunk of Your Current Debt is Paid Off

When you are applying for more credit it is better to have a large chunk of your debt paid off than having a large amount still outstanding. If you are carrying a lot of debt, then you should consider paying this off first before you try and get more credit. 

You Have All the Documents

When you are applying for a loan you will need to have supporting documents ready. A loan provider will need to verify your income and what your expenses are to determine your affordability. You will then need to have payslips, bank statements and your ID book ready. 

You Don’t Have Judgements Against You

A loan provider will check your credit history and will see if there are any serious judgements or defaults against your name. If you do have these then you might be rejected instantly for your loan application. 

You Haven’t Been Rejected for Credit Before

If you haven’t been rejected for credit before then it shows that you have a good credit history and is another positive factor when it comes to your loan application. 

Eskom Wants a Clawback of R27 Billion from Consumers

Last week, Nersa published an application for public comment from Eskom in terms of the Regulatory Clearing Account (RCA) methodology. Originally, Nersa allowed Eskom to recover costs from electricity tariffs to the tune of R86 billion, but Eskom maintains that is allowed to recover R99.6 billion. 

Stakeholders will have until January 20thto submit a written response to the applications according to the published timelines. In February, Nersa will also be holding public hearings on the matter in all 9 provinces and the decision is set to be announced by March 24thnext year. 

The current application is not expected to impact the electricity tariffs for next year as the announcement from Nersa will come too late to be incorporated in the upcoming tariff increase, which occurs on April 1stfor Eskom direct clients and July 1stfor municipalities. 

However, Eskom is proposing that the amount Nersa awards should be added to electricity tariffs in 2020/21 and 2021/22. This means that if Nersa does award Eskom the full R27.2 billion and divides it over the two years in 2021/22 and 2022/23 that the expected increase in April 2021 will go from 5.01% to 11.38%.

In court, Eskom is challenging 5 different tariff determinations by Nersa, which includes the original decision for 2018/19 that resulted in the uncertainty over the future price path of electricity. Eskom is also arguing that they were short-changed by Nersa by at least R100 billion and is asking the court to order a clawback of at least R69 billion. 

If the first application does succeed, then it could mean that next year tariffs could increase by 16.6% instead of the 8.1% as it stands. 

If the other applications from Eskom succeed, then the court might choose to refer the matters back to Nersa for redetermination. If this happens then it will further delay any price certainty. 

The current application that’s arguing for clawback from Eskom relies mainly on lower than expected sales volumes and higher than expected coal costs.

Eskom is claiming an additional R5.4 billion due to reduced sales after lost income is taken away because of lower sales due to load shedding. This is blamed mainly on the struggling economy. Eskom says in its application that the most affected customer groups are mines, households and municipalities.

At municipality level, the largest loss was in KwaZulu-Natal where 574 GWh in sales were lost due to Richard Bay alloys closing two furnaces and Karbochem having to downscale. In the mining industry, sales were reduced by 1125 GWh mainly in the gold sector, which meant the coal mine, the Gupta-linked Optimum mine was sent into business rescue. 

On top of this Eskom is also claiming R16.7 billion in additional revenue for primary energy mostly related to coal. 

Eskom also applied for R48.6 billion in coal burn costs, but Nersa only approved R39.1 billion, which has been highly criticised by the power utility as the actual cost was R51.5 billion.

Eskom says that Nersa did not take into account the current coal purchase agreement that Eskom is bound to and based its determination on a theoretical index that also fails to take coal industry dynamics into account. 

Eskom is additionally claiming R4.8 billion for variance in other costs that largely consist of depreciation and employee costs. Nersa allowed for R24.3 billion for employee costs, but this only served 32 954 staff members. This would then mean that Eskom would have to cut 6323 staff numbers in just one month of the announcement. 

Eskom argues that they are bound by collective bargaining agreements and a reduction would mean time-consuming and extensive negotiations with unions and extra costs in the form of severance packages. 

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Make Your Home Loan Investments Go Further with These 5 Tips

Property is often said to be a stable and reliable asset for all types of investors as well as one that provides consistent returns over time. However, as with anything there are some pitfalls to this type of investment, which need to be managed. Here are some property buying tips for investment purposes from the head of customer delight at Nedbank Home Loans, Thozama Mochadibane.

Are You Flipping or Leasing?

If you are considering investing in property then you will first need to decide if you are wanting to own the property for long term leasing whilst realising capital value growth or if you are planning on buying, renovating and then selling for a quick profit. 

Both of these options require planning and co-ordination and will have different time demands. With leasing, it is a continuous activity that has highs and lows in activity whilst flipping is a short-term project that needs dedicated and intensive management during the brief timeline. 

What About Your Finances?

You will need to speak to your financial advisor to make sure that you can afford the property over the long-term especially if a property sits empty whilst incurring overhead costs without producing an income. 

It’s a good idea to have a cash reserve saved up in a separate account for maintenance, transfer fees and so on. 

Check Out The Area

When you are choosing a property, you will need to do extensive research in the area you are interested in as well as the property market in terms of what other properties have sold for recently in the area as well as proximity to amenities and any future developments in the area. 

You need to take into account the tenants that you are targeting and if there is an appetite to buy properties in the area. 

Get The Best Tenants You Can

The best tenants are those that pay on time, keep the property in good shape and treat neighbours well. However, it is not always that easy to find these kinds of tenants. 

When picking tenants, you should do thorough credit checks, intensive screening and ensure you have an air-tight lease agreement. You should also take the time to meet a variety of potential tenants so you can get a gut feel as to the type of tenants they are.

Keep All Documentation 

You will need to keep and maintain documentation to ensure transparency and manage expectations for everyone. You should send timely receipts to clients, review the contract on a regular basis and keep images in labelled folders. Also, having a simple maintenance schedule can help in smoothing out expenditure curves over time. 

Property investing can look desirable and it can be a guaranteed money maker, but only if it is managed properly so that it can become part of your retirement plan and not just a burden. 

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Changes to 3 New Tax Bills

On Tuesday 26thNovember, three taxation bills were passed by the National Assembly and the parts of legislation are set to go to the National Council of Provinces.

The new legislation formed part of Tito Mboweni’s budget announcement on 20thFebruary and over September, there have been several public hearings on the bills. 

Here is a quick look at some of the prominent changes in the bills. 

Rates and Monetary Amounts and Amendment of Revenue Laws Bill

Changes in rates and monetary thresholds are dealt with in this bill, for instance, increases of excise duties on tobacco and alcohol, changes to personal income tax tables and changes to the eligible income brackets that meet the criteria for the employment tax incentive. 

The Standing Committee, in its report on the bill, agreed with the National Treasury and SARS that the increase in illegitimate products was due to both SARS tax administration challenges and weak law enforcement. The Committee decided to apply more focus to the monitoring of law enforcement measures on illegal tobacco trade and SARS capacity as well as calling on the government to work quicker on taxing other tobacco products like tobacco heating products and electronic cigarettes. 

In regards to personal income tax, the bill aims to raise an extra R12.8 billion. This will be done through increasing the primary rebate, which will then have an effect on tax free rebates.  The relief from the primary rebates increase will go towards lower income groups. Also, there will be no increase in medical tax credits to assist NHI funding and to provide extra tax revenue. 

The Taxation Laws Amendment Bill

The proposals here will affect individual savings and employment tax, value added tax, business tax and the Customs and Excise Act. 

The first proposal looks at revising the tax treatment of surviving spouses’ pension. The aim here is to reduce the financial pressure when calculating taxes that retirement funds may hold back on spousal pensions. The amendment will become effective on the 1stMarch 2021. 

There is also a proposal to look at the Venture Capital Companies tax incentive scheme, the VCC, in terms of the permissible deduction for investors. In 2015, changes were made to the VCC scheme to broaden it and increase uptake, but this resulted in high net worth companies and individuals trying to reduce their taxable income by excessively investing in VCCs. 

It will also refine the Employment Incentive Scheme so that it better aligns with the National Minimum Wage Act of 2018. In 2014, this scheme was introduced as a way to reduce the cost of hiring young adults that have no work experience with a cost sharing program with the government. 

The Tax Administration Laws Amendment Bill

Technical corrections will be made in the third bill. Corrections will be made to the following acts: Customs and Excise, Income Tax, Value Added Tax and Skills Development Levies. The amendments here look at aligning time periods for refunds, dates and amounts to the Tax Administration Act.

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