The most common reasons why loans are rejected in South Africa

Depending on your financial circumstances, personal loans can help fund big purchases or provide some relief in an emergency. They could also be used to consolidate high-interest debts into a lower cost single monthly payment.
While many South Africans may have, at some point in their lives, applied for a personal loan, not everyone is successful in getting one.

Vera Nagtegaal, executive head of online comparison website, said that reason more often than not, is because the consumer is over-indebted.

“Credit providers have a responsibility to ensure that the applicant not only pays back the loan but also avoids spiralling into a black hole of debt,” she said.

In an attempt to try and reduce the more than R1.7 trillion of consumer debt in South Africa, president Cyril Ramaphosa signed the controversial National Credit Amendment Bill aimed at writing off the debt of millions of South Africans.

The legislation is expected to provide debt relief for consumers who earn R7,500 per month or less, with unsecured debt of up to R50,000, by suspending either a portion or all of the debt.

Nagtegaal pointed out that while anyone who qualifies may be excited at the possibility of having their slate wiped clean, having this reflected on their credit record may affect the outcome of any loans they apply for in the future.

She said that in this tough economic climate, financial institutions cannot issue a loan if there is any possibility of it not being paid back.

“The major credit providers are usually quite strict and won’t lend to anyone considered too risky.”

Below Nagtegaal outlined some of the key considerations that financial institutions use when considering a loan.

Employment status

Most service providers are likely to only consider your application if you have a permanent job and have been working at your place of employment for six months or more.

Others simply require you to have a steady income. If your income history is irregular, a lender may be reluctant to provide you with a loan.

Bank account

You need a bank account for credit providers to check that a salary is paid directly into your bank account electronically each month.

If you are paid weekly or fortnightly, you will be able to apply for a loan but must usually submit your four latest consecutive payslips with your application.


When institutions assess your financial position, they check whether you will be able to afford to repay the loan.

They will consider your income, expenses and other debt that needs to be paid monthly. If your affordability is low, your application will most likely be rejected.

Credit score

A bad credit score and poor credit history is another cause for rejection. Credit bureaus look at your payment history, the kind of debt incurred and debt usage.

If you’ve missed payments and have had multiple defaults or judgments showing on your account, your score is bound to be low.

Blacklisted/ insolvent/ under debt review

Once you are blacklisted you won’t be able to obtain any kind of credit or you might have a hard time obtaining credit if a credit provider has taken legal action against you and there are other defaults to your name.

“It is important to remember that if you apply for the loan it must be for yourself. You cannot apply for a loan on behalf of another person,” Nagtegaal said.

“If you already have a lot of credit, it will raise a red flag for credit providers, as the risk of non-payment is high.”

Read: The best and worst pension systems in the world – and where South Africa fits in

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The most common reasons why loans are rejected in South Africa