How do Government Loans work in South Africa? – Get Informed

How do Government Loans work in South Africa? - Get Informed

Both for individuals and businesses, getting loans is not always possible. Private credit companies such as banks and other institutions are institutions in the pursuit of revenue; and, for this reason, they ask for certain requirements that will help them reduce the risk. So, what happens with those who do not meet those requirements? Are they left with no options? Fortunately, the South African Government by means of its Departments make available certain credit lines to help its citizens and, in turn, growing the economy of the country.

Are there Government Home Loans for the Rural Sector?

In South Africa, the rural population is made up of over nineteen million people. And, unfortunately, there is an important percentage of poverty among them. For some of these people, it might be really hard to access regular home loans provided by traditional banks.

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There used to be a government program specifically created to help individuals in rural areas to access a house or to improve the house they already owned. This was called the Rural Housing Loan Fund. However, as of October 2019, this program was included within the National Housing Finance Corporation SOC Ltd. (NHFC).  

The NHFC is closely monitored by the Department of Human Settlements and its goal is to offer affordable loans to people with low income in order for them to own a house. In this way, the government takes action in looking for a solution for the issue of lack of housing in rural areas and takes responsibility on trying to honor the constitutional right of having access to housing.

How to Apply for Home Loans by the Government for Rural Areas?

For those individuals who earn R3,500 to R22,000 every month, the government has created a subsidy  called Finance Linked Individual Subsidy Program to help them finance their first house. These subsidy is to help those individuals who cannot get a subsided house by the government and also do not qualify for a regular loan at a bank.

In order to apply for this subsidy program, you will need to have approval in principle issued by a lender. At that point you will be informed as the amount of money you will be able to receive for subsidy. This amount will depend on how much you earn each month and it can be of 10,000 rands to 87,000.  

If you want to apply for this subsidy you should go to one of the following two places:

  • Department of Human Services in your province
  • Municipality of your town

You will need to take with you: 

  • Your ID (and your spouse’s)
  • Certificates of Birth of your children
  • If you are working, your payslip

Can Rural Workers get Home Loans for Building?

The loans offered by the government on the schemes mentioned above are also for building a house. That is, you can choose to start the construction of a house or buy a property that has already been built.

Here we are presenting you with alternatives to find finance from the government for you to own a house; however, this does not mean that you cannot seek finance at private institutions. In fact, there are good alternatives in the private sector.

One of these alternatives could be SA Home Loans. At this company you will find three different types of loans to finance your house:

  1. Variable Home Loan: this loan is to be repaid in 20 years and has a variable interest rate
  2. 30 Year Home Loan: to access this loan you must be younger than 45 years old
  3. Edge Home Loan: this a loan that allows you to only pay for interest rates on the first 36 months.

What are the Requirements for a Government Rural Housing Loan?

The home loans offered under the NHFC program allow you finance your house through different lenders. This means that the NHFC is not the institution that is going to give you the money for you to build your house. This organization works with others institutions, such as the following:

  • Affordable housing developments: Mettle Property Solutions, Urban Housing.
  • Landlords from private sector: Afhco Housing, Jozi Housing
  • Social Housing Institutions: Sohco, Free State Social Housing
  • Intermediaries for retail finance: Pulse Property, Elite

Notice that these are just examples of some of these housing institutions. There are hundreds of them.

Thus, since there are many institutions involved, you will have to find out which are the specific requirements set by the housing institution you choose. However, there are five requirements that will be shared by these organizations. Let us take a look at which ones they are:

  1. Being South African or being a permanent resident
  2. Legal age
  3. The household should have earnings from R1,500 to R15,000 monthly
  4. Employment
  5. Affordability

How can I get Small Business Loans from the Government in South Africa?

The government of South Africa has created institutions to help small business find financial solutions in order to grow their business. For instance, the Small Enterprise Development Agency was established by the Department of Small Business Development to guide South Africans who want to start a business or want to become bigger. Here you will find trade information, training on export import, access to market and more.

The Department of Trade and Industry has created the South African Micro Finance Apex Fund (Samaf). SAMAF also provides financial services and their main target are people that live in rural areas. Here you can find Micro Credit Loans for entrepreneurs. There is also a governmental program designed to help young people. This plan is called the Umsobomvu Youth Fund and helps the youth to start or develop their business.

Also, in response to the sanitation crisis we are currently experiencing, the South African Government has launched the COVID-19 Loan Guarantee Scheme. The National Treasury issues these loans to help eligible companies cope with the economic impact caused by the pandemic. This means that the money you can obtain from a loan under this scheme can only be used for paying salaries, or to fulfil your contracts with suppliers, for instance. 

In this article, we tried to let you know that if you do not qualify for loans at private credit companies such as banks, you should not despair. There are several other options created by the Government of South Africa that might be just what you needed. We talked about home loans for the rural sector; how to get them and what requirements to meet. Also, we mentioned some programs established by various Departments of the government that were created to help small businesses to prosper. 

Preguntas Frecuentes

What’s the most significant difference between government loans and private loans?

The most important difference between government and private loans is the interest charged. Government loans offer lower rates than private loans.

Is it a good idea to get a student government loan?

If you are taking a student loan, your best choice is a government loan. One of the benefits is that if you decide to work in the public service once you get your degree, a part of your payment can be forgiven.

How much can I borrow for a payday loan?

They tend to borrow around 8000 rands but, quote may vary according to the company.

Can I make a loan to pay my debt to buy a house in order for me just to repay my loan?

There are no such loans offered by the government. Maybe you are thinking about a consolidation loan. However, consolidation loans usually have maximum figures and, except that you only have to pay few installments for that home loan, the amount of money you need might be above this limit. Check out our articles to see if you can find information that helps you or please, rephrase your question so that we can help you further.

How do I access a start up loan for farming?

If you are looking for a government loan for farming you should first check on the different finance solutions offered by the Sough African government. Then you should check if you meet the criteria and the requirements asked by that specific loan program. Mafisa is one of the organizations you could check out.

How can I get a loan to start a farming business?

There exists an organization supported by the South African government called MAFISA which stands for Micro Agricultural Financial Institutions of South Africa. This organization provides loans to promote agricultural activities and businesses. In order to be eligible, the applicant must have a positive credit history and enough affordability capacity to repay the loan. 

Good day, please advise me on how to apply for a housing loan? Thank you.

There is a program included in The National Housing Finance Corporation SOC Ltd which is constantly checked by the Department of Human Settlement. The objective of this program is to offer affordable home loans for people who have a low income and are not able to apply for a loan at a regular bank. 

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