Questions about South African Loan options and secured lending

[mmacleod]

I have some questions about lending money in South Africa, any input would be appreciated.

First before I get to the questions, a summary of the types of loans I'm already aware of:

Homeloans
Prime linked - Nedbank, Standard, FNB, ABSA, Investec etc. - Vacant land, Building and existing homes
Jibar linked - SA homeloans, Integer, (Others?) - Existing homes only

Personal loans
Capitec, FNB, Nedbank, Standard bank, ABSA, direct access etc. - unsecured, maximum ~R150000

Home equity loans/Equity release mortage
Various banks - secured, have to be over 65 years in age

Various bridging finance offers
Insane interest rates and only for very short term, so not really worth considering in this context

P2P lending
Rainfin - Unsecured, max 24 months, interest rate from 10.75% upward. Not sure if upper limit on amount, other than that which short period and high interest naturally apply. e.g. on a 22k salary ~R90000
Lendico - Unsecured, max 3 y ears, max R200000, interest rate also from around 11% and upwards.
Are there any toher options here?


Okay with the above out of the way here are my questions:
1) Where are the 'secured' lending options, looking at any other coutnry int he world it seems if I have an existing asset e.g. a house I paid for in cash. I should be able to leverage that to get finance at a reasonable rate and possibly larger amount than an unsecured loan, e.g. R300000 loan.
Perhaps I'm missing something but it seems in South Africa I can only do this if (1) I am over 65 so qualify for 'Home equity finance' (2) The loan is a homeloan.
Are there really no 'secured' finance options on the table, if so why?
2) Are there any options I've missed, does anyone know other p2p lending options or anything else that might be of interest?

 

[HavocXphere]

You should be able to get a big (secured) personal loan if you specifically ask for it....there is no such product advertised because 99.9% of the people don't need it. They need house car and maybe a business loan.

Would help though if we knew what you are trying to achieve here though.

Also...once had someone offer me a 10m USD loan by accident (Goldman got the wrong oke).

 

[mmacleod]

@HavocXphere

Rough situation is roughly as follows.

Fiance and I are trying to build a house, while technically we qualify for the building loan for a variety of reasons I would prefer not to take one. A few of these reasons (Banks consider me self employed making it a huge hassle; We have to wait 6 months until our new rental income can be considered; I earn a lot of money freelancing internationally that banks probably won't accept, etc. etc. House will cost more if we do it through a bank and we have less control over what we can do, they are very stupid about anything that is not brick etc. etc.)

Our financial situation recently got somewhat complicated by her dads estate. Basically the estate was going to go for a quick sale on the house at way less than what the house could be technically worth (with a bit of love and care) as the house has a lot of rental promise we decided rather than letting the sale go through, to buy one of the people involved out at what we consider a 'bargain' price and then manage the property as a rental.
Essentially the deal has temporarily eaten up R270000 of our cash that we were going to use to build with, and a 55% stake in a property that will make a good rental income and we can sell for quite a profit (hopefully) in future.


In the meantime however it leaves us with the following situation.
1) We have about ~R550000 or so of value tied up in the rental property.
2) We have vacant land worth around ~R700000 with about ~R200000 worth of retainer wall already sitting on it.
3) The land is bonded with an access bond and we should be able to pull about ~R450000 back out of it.
4) We need at least ~R700000 (ideally a bit more) to get a liveable house up so that we can get into it and stop blowing money on rent.

So basically we need either to get a R200000/R250000 secured loan of some type or we need to give up and try get a building loan - I really don't want to go the second route as it will be costly in the long term, so I'm trying to determine what other options are available to me.

Currently I've come up with the following possibilities:
1) Secured loan of some kind against the rental - but I can't find any information on what is available in terms of this.
2) Take a 200k loan from something like Lendico, interest rate a bit high but its only 3 years so it is still maybe acceptible.
3) Do something somewhat 'sneaky', e.g. I 'purchase' my fiances portion of the rental from her and take a normal home loan for that (less red tape than building loan), we then take the money she 'earns' from that and use it to build.
pros: I can then I believe deduct tax on the loan interest cons: not sure if such a thing can actually be legally pulled off, high bond registration fee etc. that a different type of loan might avoid. We don't necessarily want to 'exchange' assets like this.

 

[HavocXphere]

Does the fiancee own the other 45% of the rental prop?

Using the rental prop as security is likely your best bet though the banks won't like the non-100% part.

Also - I think you'll get hammered on the interest rate regardless of what you do here to be honest. Still if you say you earn will then maybe you can kill the loan fast.

That scheme of yours will be pretty messy tax wise I think - to be safe I'd imagine you'd need at least and independent valuation & then she'd end up paying CGT. Not sure you'd be saving on the red tape front there.

 

[mmacleod]

No, the deal leaves her with 55% and the remaining 45% split up between two of her siblings, which would probably make bonding it a bit compelx as well. You are right that the deal would also attract CGT which is going to be a big bummer, so the home loan idea is probably also out of the question anyway.

That leaves basically Lendico/Rainfin or similar - does anybody else know any other players in this market?
Or a secured loan of some kind - which I still know nothing about. What market players offer secured loans, all the banks or?

Building would free up ~R5000 a month that I currently spend on rental, the rental property (tennants just moved in) will after expenses be giving us a further ~R5000 a month - so I could probably throw R10000 or a more a month at such a loan and kill it relatively quickly - so something like Rainfin is not out the question, even at 12% it would still leave me better off than going the building loan route (in my opinion) - but wondering if maybe there isn't some better alternative...