South Africans are lying to secure car and home loans – and getting away with it

 ·22 Oct 2022

The latest South African Banking Risk Information Centre Annual Crime Statistics (Sabric) report shows a drastic increase in the number of fraudulent Vehicles Asset Finance (VAF) applications as well a slight – but felt – increase in home loan fraud.

Sabric looked at fraud-related information provided by major financial institutions such as Capitec, Bidvest, Absa, Discovery Bank, FNB, Standard Bank and others. It said that the statistic used covered the period from 1 January to 1 December 2021.

Criminals are taking it upon themselves to try their luck in getting their hands on large sums of money. Vehicle financing company Wesbank reported that the average value of cars financed in August of this year was R337,252.

According to Sabric, 2021 saw a 53% increase in the number of VAF cases, up from 13,095 occurrences in 2020. The potential value of loss from these criminal activities is valued at around R7.3 billion in total.

Over 2021, Gauteng and KwaZulu-Natal at 38% and at 24% respectively, accounted for more than half of reported fraudulent applications nationally.

Home loans, on the other hand, can end up being upwards of millions as the national average purchase price of a home, according to Ooba, is R1,389,715.

Mortgage loan fraud applications saw a 1.6% increase in 2021, compared to the year before, with 2,700 cases being reported. Sabric added that this meant that potential losses increased to a total of R3.4 billion.

Actual losses increased by almost half (47%) when compared to the year before – reaching a total of R445.6 million. 12% of the reported fraudulent home/mortgage loan applications were successful last year, the group said.

It added that despite banks, in the majority of successful fraudulent applications, having some protection in the form of bonds and deed registration over the properties, huge expenses are still incurred in legal and eviction costs.

Gauteng, yet again, was a hotspot of crime, with 64% of all cases terminating from the economic hub, followed by the Western Cape and KZN.

Loan size

South Africans are taking on more debt despite feeling the pinch of a rising cost of living. Data from DebtBusters revealed the following three expenses to make up the most amount of debt:

  • Vehicle and asset financing (VAF);
  • Home loans and;
  • Unsecured loans.

DebtBusters’ most recent Debt Index for the second quarter of 2022 showed the average unsecured loan granted was R41,100 while the average value of a secure loan was R206,000.

According to the group, secured loan size grew by 28% over the past four years, while the size of secured loans increased by a similar degree by 26%.

Vehicle debt increase

DebtBusters noted in August that vehicle and asset financing (VAF) was set to become increasingly difficult to pay off and adds to the amount of debt taken on by consumers.

“Vehicle debt has increased in the last few years, indicating that more consumers with assets (vehicles in particular) are seeking financial assistance,” said Sager.

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