EasyCredit is a secured lending facility which allows you to borrow money against the shares in your portfolio. But how does it stack up against other types of lending? Mbulelo Mpofana, our EasyCredit Head of Product gives us the run down.
South Africa has a large and mature credit market with variety of different debt instruments. However, access to securities-based loans is largely limited to those with sizeable portfolios, restricting the average investor's ability to leverage portfolios for more affordable credit.
Secured credit comes at a significantly lower cost than unsecured credit, this is to be expected as pledging an asset as security significantly lowers the risk faced by a lender. EasyCredit charges interest at prime (currently 11,75%) + 3%. Placing EasyCredit above the other forms secured credit, which are secured by less volatile real/physical assets such as homes, but importantly cheaper than unsecured forms of credit like credit cards, retail credit, personal loans, and short-term credit (like payday loans). Check out your interest rates, you may be able to save money using EasyCredit rather than unsecured credit.
The value of households’ outstanding liabilities (mostly credit) at the end of 2022 was approximately R2.7 trillion. Secured credit makes up the bulk of that with mortgages taking up 46%. Unsecured credit- which is generally more expensive, makes up a significant 41%.
According to the National Credit Regulator (NCR) banks hold about 80% of outstanding loans with non-bank providers such as vehicle finance companies and retailers making up the rest. The approval rate of loan applications in South Africa is around 30%.
Early indications from applications we’ve received show that EasyCredit will not only add much needed diversity to the credit market but we’re also seeing much better approval rates so far with 90% of loans being approved. EasyCredit’s approval rate may trend closer to the industry average over time but, we expect that it will stabilize significantly higher than the market given the nature of the security pledged by our clients.
Unlocking Investment Potential:
Equities stand as one of the largest asset classes owned by South African households, offering substantial wealth-building potential over the long term.
EasyCredit allows you to access addition cash by borrow against your portfolio at better rates than unsecured loans. You can avoid disrupting set long-term investment goals, breaking the terms on your cash investments or liquidating your shares to meet short term needs. There are no restrictions on how you can use the funds, which means you can use EasyCredit for whatever you need cash for, like putting down that deposit on a home or to avoid withdrawing from you tax free savings account (TSFA) using up your allowance, and stay invested in the market.
Results from the SA Fund Managers Survey, conducted in November by Bank of America, show that more than 70% (compared to 55% 3 months ago) of asset managers believe that SA equities are undervalued, with more than before looking to buy instead of selling SA counters before next year.
If you also see opportunity and are looking to expand your portfolio, diversify into a new share, max out your TSFA or invest in an offshore portfolio EasyCredit can give you easy access to funds.
Request for feedback
In putting this together I trawled through a significant amount of information from various data sources such as the Reserve Bank, the credit regulator’s reports, corporate research reports and media articles as couldn’t find an easy source for the data required to get a good picture of the local consumer credit market. I’d like to create something valuable for readers interested in the credit market, so please let us know what you think. I would love to hear you views on this blog and EasyCredit by commenting/liking/sharing on social media.
Contact Mbulelo directly on his social media to share your feedback:
LinkedIn: https://www.linkedin.com/in/mbulelo-mpofana/
Twitter: @mbuleloMpofana