Seek solutions by having honest and meaningful conversations with your bank

By Josef Kefas Sheeham

Indeed, life is a journey with ups and downs, difficulties, and happy moments. We will talk about getting a bank loan as well as what to do if you find yourself in debt and your ability to make payments becomes problematic.

An Overview of the Loan Application Process

It is now crucial to understand the intricacies of the loan application process in the modern world. This is especially true in Namibia, where the constantly shifting financial landscape presents unique opportunities and challenges. There are strategies to make the process of applying for a bank loan less complicated, even though it occasionally feels like navigating a maze. Based on my personal experience of 22 years working in various credit facilitation roles as a Senior Credit Manager, Credit Manager, Bank Branch Manager, Centralized Credit Head Office, and Manager, I have found that banks are always willing to listen, even if you are having trouble repaying the loan. Banks in Namibia provide a wide variety of loans that are designed to satisfy different income requirements. They include business loans, home loans, car loans, and personal loans. Every loan kind has a distinct function. For instance, home loans are secured by the property being purchased and are designed exclusively for real estate transactions, whereas personal loans are usually unsecured and can be used for a number of purposes.

At the center of the loan application process, creditworthiness is a key factor that influences bank lending decisions. The evaluation of your capacity to meet your financial commitments, especially those related to loan repayment, is known as creditworthiness. To put it another way, it gauges the degree of risk involved in making loans. These consist of things like your credit history, current debt levels, income stability, work status, and sometimes even educational background. No single factor alone establishes creditworthiness, even though credit history which includes prior loans and

repayment patterns holds substantial weight in this assessment. Banks place a high value on employment and income during the loan application process, so you’ll need to submit your pay slip. Annual Financial Statements, Management Accounts, and Cash Flow Projections are required if you work for yourself. If you own a home you need to provide municipality statement or a rental agreement if you do not own a house. If your company has been operating for a long time, keep in mind that you require a set of financial statements for two years. A letter of good standing from NAMRA and founding statements are also necessary if you want a business loan. General information will be shared during the onboarding process.

Furthermore, clean credit record shows the bank that you manage your money responsibly, giving them confidence that you will be able to pay back loans on time. A bank could be more likely to give you better terms on a loan if they have faith in your ability to repay them.

Therefore, the bank’s decision to reject or not approve your loan doesn’t mean that you’re a bad customer; rather, it just means that there was an error in your application. If your loan is turned down, schedule a meeting with your manager to discuss the reasons behind the decision and how you can improve your application to get the loan approved. Don’t move banks if your current bank denies you a loan.

Finding assistance for debt issues is crucial

We’ve talked about the loan application process. Let’s talk about what to do if your business is struggling, your income is reduced, or you lose your job and are unable to make your bank loan payments to settle your debt. When you spend too much and save too little, you get debt. It is never too early or too late to contact your personal banker. You may be worried about talking to the bank. Hence, your first move should be to speak to your bank if you’re going through financial difficulties. It is not advisable to run away from your debts. Your banker understands that due to general increases in the cost of living, people are finding it increasingly difficult to keep up with their loan installments. To add to the trauma, people are also finding it difficult to sell their properties to get out of debt, due to the general slowdown in the economy.

Additionally, when approaching the bank, you must first establish exactly what the extent of your financial difficulty is and perhaps come up with a proposal as to how you think you will be able to overcome the next couple of difficult months, while still honouring your debt. From here, the bank can always come back with a counterproposal on how to sort out the difficulty.

Moreover, here’s what you need to know about how debt consolidation and debt restructuring work and how to decide between them if you’re concerned about high debt balances. Debt consolidation

and debt restructuring are effective ways to tackle debt. Debt consolidation works by combining all your existing loans into a single, larger debt loan. In effect, your bank will pay off the previous debts, leaving you with only a single loan to repay. It enables you to improve your cash flow and simplify your installment. However, there are several things to consider before you go ahead. This includes the interest and fees on existing debts, interest charges on your new versus your existing debts, and repayment comparisons for your new loan.

Furthermore, debt restructuring involves reducing the interest rates on loans, deferment of installments due to be paid, or both. Debt restructuring can be a win-win for clients because the business avoids bankruptcy. Therefore, taking a payment holiday during the term of your loan does not change your monthly installment amount, but the term is extended to take into account fees and interest that accrue during the grace period. In the end, the payment holiday will cost you more, but you will have gained immediate relief from a constrained financial position.

To that end, it is possible to enhance your creditworthiness through deliberate efforts and responsible financial practices; it is not a static quality.

Then again, bad things can happen, and it’s never easy to experience financial difficulties, particularly when debt repayment is involved. Take stock of your circumstances, use the tools at your disposal, and consult your bank for advice instead of trying to avoid banks.