BORROWING money is usually something we often don’t talk about and this is a reason why we know very little about it.

You may need a loan for an unexpected medical expense, a deposit to secure a place at a school or university, a car repair, home renovation or overseas holiday that you need to borrow for.

Marlies Kappers, chief marketing officer at DirectAxis, explains the right way to take out a personal loan.

The first problem loan applicants need to know is that credit providers can’t approve every application they receive.

The National Credit Act regulates lending in South Africa. This law makes it the providers responsibility to check that the applicant can afford the loan.

Credit providers follow a series of steps before approving the loan.

“These include confirming the applicant’s credit score, income, amount of existing debt compared to income and other expenses.”

The four credit bureaus that provide credit scores – Experian, TransUnion, CompuScan and XDS – and all South Africans are entitled to one free credit report a year from one of these providers.

“If your loan application is not approved it could mean that you have a poor credit score. Based on that, credit providers may be unwilling or not allowed to lend you money.”

Assuming you have a suitable credit score other documents you will need when applying for a personal loan include:

- Proof of identity in the form of a clear copy of your South African identity document

- Proof of residence, such as a recent utility or rates invoice or similar document that confirms your residential address. The document shouldn’t be more than two months’ old. If you are renting and have abox numberrather than a street address, you will need to provide some other form of confirmation, such as an affidavit from your landlord.

- Proof of income. You can provide copies of recent payslips or bank statements for the past three months.