Many banks in South Africa are cutting back on credit extensions. Johan Burger, CEO of FirstRand, attributes consumer affordability issues to the dilemma. Last year, more South Africans took on mortgages, but unsecured lending in the form of personal loans and credit cards were declined.
Burger said that credit extension is going to be low for the next few years unless South Africa sees some real recovery in economic growth. Banks want to be able to lend, but the affordability levels of consumers are decreasing which increases a bank’s risk of getting their money back.
This phenomenon isn’t a South African issue. According to Business Insider, banks have started to tighten lending standards for prime and sub-prime borrowers as well as their lending standards for prime and sub-prime car loans. This trend started in 2016 when banks became too lax in their underwriting terms, which boosted sales of new and used cars to record levels. This increased their risk, and sub-prime car loans soon started running into trouble and banks began to tighten their lending standards.
With consumers increasingly struggling to get bank loans for cars, many people are opting for rent-to-own vehicle finance. With this type of car financing, vehicle-financing companies don’t research your credit history and you don’t have to take out a new line of debt. If you have been blacklisted in the past or denied a car loan from a bank, then it is worthwhile to contact a rent-to-own vehicle-financing company such as Earn-a-Car. By following a few simple steps, you could be driving away with a new set of wheels in no time. Contact Earn-a-Car for more information today.