Have you ever wondered how a lender calculates how much you can borrow, and on what terms? It probably won’t surprise you to know that technology is playing a bigger role in allowing banks to quickly create loans that are truly tailored to you. In fact, you may already have qualified for a pre-determined loan offer.

A known quantity

When this happens, it shows the bank believes you’re creditworthy and can appreciate the benefits of a personal loan. But it also highlights the convenience of being ‘known’ by your bank. Firstly, you don’t have to re-submit the FICA documents. And unless crucial information like your address, employer and contact details have changed, then your application can proceed without delay.

It also helps if your salary is deposited into the bank account you have with us. The monthly inflow of your salary and outflow of expenses help to paint a picture of your financial well-being. For instance, if we see you have disposable income – cash you have left after paying all your regular expenses and debts – then that means there’s a better chance you can afford a loan.

Having this clear picture of your income and expenses means we also know when too much is too much. As a responsible lender, we will never give you more credit than is healthy for you.

Pre-determined loan offers

On the strength of this information, you might get pre-determined loan offers from time to time. You could be contacted directly, or receive a loan offer in the Nedbank Money app, or when logged in to Online Banking.

These offers are based on a number of factors, including how much you can afford to pay every month, your credit record and your past use of loans.

Loan applications

When you apply for a loan, you could know within 90 minutes whether your loan has been approved. A decision can be made this quickly if we have all the FICA and affordability information needed for the application.

You’ll notice how changing the term of the loan or the interest rate will change your monthly payment

We need to calculate whether you can afford the monthly repayments. This is done by looking at all your income and expenses to determine how much disposable income you have left. Considering your application also includes a look at your credit score and credit record, to see whether you’re a reliable payer. If your credit score is good, you have a greater chance of getting a loan at a better interest rate.

If your score is low, your application might be declined. Or else you might be granted a loan, but not at the favourable interest rate you’d have been offered with a better credit score.

How a loan is tailored for you

By knowing the maximum amount you can pay per month, we can then start tailoring a loan for you. Say, for instance, you qualify for a loan of R12,000 that you can pay back over 12 months. Based on an interest rate of 18%, your monthly repayment will be just over R1,350. If you have a low credit score, this interest rate may be a little higher than in this example.

But if you want to pay back the loan over 24 months, you’ll pay about R790 a month. This is good for your monthly budget, because you'll then have R560 cash every month to take care of other expenses. But by extending the length of the payback period, you also pay back more interest over the term of the loan. Over 12 months the total interest, fees and insurance is about R4,200, while over 24 months, it’s just over R6,900.

This is only one example of how your loan truly is designed around you, your needs and your means. If you’d like to explore how different factors affect a loan, you can use tools like this calculator to get an idea of how much you can afford. You’ll notice how changing the term of the loan or the interest rate will change your monthly payment.