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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3 Major Problems with the New NHI

Three major concerns with the new NHI have been outlined by the Public interest law centre, Section 27. The National Health Insurance Bill aims to provide universal access to quality healthcare throughout South Africa. It is open to public comment until 29thNovember. 

However, since its inception, the bill has been surrounded by controversy and concerns have been raised in terms of how it will be funded, the quality of care and what will happen to private medical aid schemes. 

Section 27 shows three major aspects of the NHI Bill that need to be changed. 

Firstly, is governance. In respect to this, the Minister of Health will appoint the NHI Fund Board Members, the Board Chairperson and the CEO of the NHI Fund. The decision making is then far too concentrated.

The second issue is transparency. All NHI related processes and decisions will need to be transparent if they hope to increase public trust in the NHI and to also reduce corruption under NHI.

The third major issue is try before you buy. With the NHI Bill comes new and untested structures and administrations. The creation of these new structures are being bought into law and if they fail there is no way back and without any transition provisions, which could stagger implementation and allow for learnings.

Healthcare Workers Are Not Happy

Trade union Solidarity has warned in a recent report that the NHI will have an impact on the healthcare industry. 

Research psychologist at Solidarity Research Institute, Nicolien Welthagen said the report is based on questionnaires that was sent to both private and public healthcare practitioners across the country. 

General feedback was that healthcare practitioners have massive concerns about the proposed NHI. Overall, the findings point towards a distrust in the government in regards to the way that they want to implement and manage the NHI. Welthagen said that 80% of respondents are negative or doubtful about the NHI. She went on to say that in accordance with the results the respondents don’t believe that the healthcare system or its delivery will improve with the NHI.

Only 15% of respondents believe that the NHI could be successfully implemented and 84.5% have the view that the implementation of the NHI could potentially destabilise the healthcare system and could harm the high quality service that is already being provided in the private sector. 

On top of this, the report also highlights the huge risk of health practitioners leaving the country and the threat this could have on future healthcare in South Africa.

She said that 20.8% of respondents have already taken steps to emigrate and 41.06% would consider leaving South Africa when the NHI is implemented. 

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SA’s Outlook Changed to Negative by S&P

On Friday evening, South Africa’s sovereign credit rating was changed to negative by S&P Global Ratings, citing rising fiscal deficits, low GDP growth and a growing debt burden. However, the rating agency did not downgrade the country further into junk. If fiscal deterioration continues though due to rising interest costs, higher pressure on spending or the “crystallization of contingent liabilities related to state-owned enterprises, especially Eskom” then S&P may lower the rating. 

Analysts did anticipate this assessment though and 16 out of 22 analysts in a Bloomberg survey expected the outlook to change from stable to negative. 

As it stands only Moody’s still has SA at investment grade. After the decision on Friday, S&P has South Africa’s long term foreign currency rating at BB and the long term currency rating at BB+. 

At the beginning of November, Moody’s changed its outlook to negative. 

S&P said on Friday that its rating was constrained by low GDP per capita growth, large and rising government debt burden, weak economic expansion and sizeable contingent liabilities primarily tied to debt laden Eskom. 

S&P will be closely monitoring South Africa’s economic performance to see if it weakens further. They also said that they could consider lowering the ratings if property rights, rule of law or enforcement of contracts were to weaken significantly, which would undermine the investment and economic outlook. But they think that is unlikely. 

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Watch Your Wallet This Festive Season… Here is How Criminals Will Target South Africans

The national marketing and communications manager at Fidelity ADT, Charnel Hattingh says that criminals will be targeting the increased number of shoppers over the next few weeks, who are doing their festive shopping.

All shoppers will need to practice caution and to be vigilant whilst shopping. There is generally an increase over this time of year in follow home incidents. This is where shoppers are followed home after being at the malls and are subsequently hijacked in their driveways. This is because criminals are aware that shoppers have a car full of newly bought items and are usually distracted and easy targets. 

If you think that you are being followed, then drive to your closest police station or a security provider. Also, don’t forget your general hijacking safety tips like waiting in the road for the gate to open before driving in and ensuring that the gate is closed before getting out of your vehicle. 

So, what can you do when you are at the mall?

Shop Safe at Malls

When you are at a shopping centre or a mall, you should carry as little as possible in your pockets and handbag. Rather leave any unnecessary bank or store cards or large amounts of cash at home. The prime hunting ground for a pickpocket or bag snatcher is a packed store. You should also never leave your handbag or wallet in a trolley. If you don’t use a bag, then keep your purse or wallet in the front pocket of your jacket or trousers. Criminals will also be targeting phones, so keep yours out of sight in your front pocket or a zipped bag. 

If you plan to draw a large amount of cash, then take someone with you to keep an eye out whilst you are at the ATM and on the way home watch out for any suspicious individuals or vehicles. If you can avoid drawing large amounts of cash then do so, because electronic payments are safer. 

Fidelity ADT, also said that your safety outside the mall is just as important as inside the mall. Before you leave the mall, have your keys ready so that you don’t waste any time getting yourself and your purchases into the car. This also means that you will be able to keep hold of your handbag whilst you walk. If someone does try to take your bag, rather let it go. 

Hattingh also says that you should try and avoid late night shopping. Even though the idea of a quieter shopping centre is appealing, you are more vulnerable in mall bathrooms, car parks and so on. If you don’t have a choice and need to shop late then be vigilant and you should report any suspicious individuals to mall security.

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South Africa May Fall Further into Junk as S&P Likely to Cut Outlook

This week, could see South Africa falling even further into junk as it looks like it is about to lose its only stable outlook on its credit ratings. 

In a Bloomberg survey, 16 economists out of 22 think that S&P Global Ratings will change its outlook to negative on Friday. S&P already hold South Africa’s foreign currency debt at two levels below investment grade and another downgrade could be on the horizon. 

This follows Moody’s Investors Service changing its outlook to negative a couple of weeks ago after the Finance Minister, Tito Mboweni described that due to the billions being spent to bail out Eskom, the fiscal outlook is rapidly deteriorating.

In May, S&P warned in its assessment that continued fiscal deterioration, mounting external financing pressures and structurally weaker economic performance could prompt the rating service to lower the nations credit assessment. 

So What is the Rating Risk

If there is a further downgrade, it will take the country even longer to recover its investment grade status at S&P. Also, Moody’s investment grade will look more out of alignment with S&P and Fitch Ratings.

For the current credit rating from Moody’s to remain unchanged there will need to be a real fiscal strategy that aims to contain the rise in debt. 

In a Bloomberg survey, 86% of economists said that Moody’s will take South Africa to junk next year.

A downgrade by Moody’s will force South Africa out of the FTSE World Government Bond Index, which could spark sell offs and outflows of $15 billion according to the Bank of New York Mellon. It will also increase the borrowing costs and make it even more difficult for government to finance the budget. 

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Are you Considering Funeral Insurance? Here are the Top Reasons Why You Need It

Life is unpredictable and it is important to take care of your family financially, which you can do by saving each month and taking out insurance policies that will look after your family. 

One such insurance product is funeral insurance. If the worst were to happen, your family will be able to use the money from this insurance to pay for your funeral and with family funeral plans, you can include your extended family as well. 

Here are the top reasons as to why you should take out funeral insurance. 

Your Funeral is Paid for

Funeral cover pays for your funeral and with a family funeral cover plan, it will also pay for the funeral of a loved one who you have added to your policy. On your death, your family will receive a lump sum pay-out, which will be enough to cover your funeral, so that your family does not have to pay from their pocket. 

With funeral cover, you will not need to undergo a medical examination like you would have to with life cover. However, ensure that the policy does not have any exclusions regarding pay-out. There are funeral insurance plans that will pay-out within 48 hours of death if it is due to natural causes, other deaths may require further investigation. 

Funeral Cover is Affordable

Many think that funeral cover is expensive, however, you will find that it is quite affordable. The monthly premiums for funeral cover are much lower than other insurance products, so you can give your family peace of mind without breaking the bank. 

There are some funeral cover options which are based on your income and the premiums will only increase when you add more people to the plan. 

Covering the Extras

People often underestimate the cost of a funeral, but they are expensive. Not only do you need to consider the cost of the actual funeral but also the extras like a headstone, transport for family, flowers, catering and so on. 

When your family can easily cover these expenses they can grieve peacefully without the extra stress of money hanging over them. Having funeral insurance in place will then protect your family from incurring debt. 

Don’t Give Your Family Debt

If you are the main breadwinner in the family, then you might be worried about getting your family into debt when you pass away. Also, you might be worried about having to pay for a funeral of a loved one because it will be too expensive for you to handle. This is where a family funeral cover comes into play.

If you pass away, then your family won’t need to bear the financial cost of a funeral and if a loved one that has been named on your policy dies then you will be able to give them the funeral they deserve without having to go into debt yourself. This is the biggest benefit of funeral cover and in the long run, it will save you money. 

Fast Pay-outs

If you already have life insurance in place, you may find that you will need to wait a while before the plan pays out. However, funeral cover pays out quickly and often within 48 hours of death. Your family can then arrange the funeral sooner rather than later. Your family will then not have to worry about finding the funds to pay for your funeral. A fast pay-out means everything can happen sooner and the grieving process will be easier as the finances will be taken care of. 

Having funeral cover in place for you and your family means that the financial burden of funeral expenses is lifted. Funeral cover offers affordable rates and fast pay-outs so that you or your family can grieve in peace without extras worries. 

Tips to Stay on Budget this Black Friday

Black Friday is coming and it is the biggest shopping day in South Africa, so whilst retailers are getting ready to reveal their discounts, financial service groups are urging consumers to shop with caution. 

As consumers, we are already carrying an immense amount of debt and even though Black Friday will give us a chance to get those items we want at discounted prices, we need to be smart about it so we don’t end up in further financial trouble. 

According to Bayport, a loan and insurance group, shoppers are seduced by the number of deals and specials that are available on the day, but with budgets already being tight, consumers run the risk of getting into more debt. So, the rule is easy enough…don’t spend what you haven’t got. 

So, here are tips that can help you to not blow your budget this Black Friday.

Have a Game Plan

Retailers always have a plan ahead of Black Friday and so should you. Black Friday is now a yearly event in South Africa and ideally, you should start planning for the following year once the current year is done. 

When you are planning for Black Friday, you should have saved up some money so that you don’t need to use your monthly cash flow and budget. Also, have a list ready of the things that you want to get your hands on instead of just buying items for the sake of buying them because they are on special. 

Don’t Spend Beyond Your Limit

You will need to know what your budget limits are. It is a bad idea to pile purchases on to your credit card until its maxed out and it is even a worse idea to increase your credit limit in preparation for Black Friday, because you are then just going to get into a heap of debt trouble. When debt is unplanned then it becomes difficult to pay it off. 

Have a limit in place that you can afford and stick to it.

What’s Happening with Your Money

You need to know your money. How much you earn, what your monthly expenses are and the balance that is left once everything has been paid for. 

You should take a look at your bank statements each month and ensure they are correct. When you get into the habit of reviewing your finances regularly then you will gain a better understanding of your money and will be less tempted to overdo it on Black Friday. 

Shop Smartly

If you are on the hunt for a bargain, then you need to shop smart. If you have items in your cart that you were already planning to buy and have budgeted for then getting these items on Black Friday can save you money. 

Black Friday is also a great time to get Christmas presents. Make a list of who you need to get gifts for and what gifts you want to get them. You might be able to get some good deals for some presents on Black Friday. 

However, if you buy something on Black Friday that you didn’t plan on buying in any case then you will be going outside your budget. If you are using money that was meant for something else then you may find you can’t spend as much on groceries or going out or you will just blow your budget, which isn’t good. 

Have a plan, know what you want to buy and have a budget and stick to it so you can avoid overspending this Black Friday.