Scheme Benefits Cato Manor Residents
The loan guarantee fund was capitalised with R7 million of European Union funds and is administered by the Homeloan Guarantee Company (HLGC).
The European Union's Technical Assistance Programme leader to the CMDA, Dusan Botka, is confident that the scheme can bring major benefits to Cato Manor residents.
"The fund has made it possible for people to top up their subsidy and improve their homes. Borrowers have to return the money so that it can be lent out again. I believe it can change the lives of lots of people," he said.
The scheme is a breakthrough for the people of Cato Manor, the great majority of whom have a monthly household income of less than R1 500, and who would normally have difficulty accessing loans for housing purposes.
The scheme gives beneficiaries of Cato Manor housing projects access to loans of between R3 000 to R7 000, repayable over a maximum of five years at competitive interest rates. Approximately 20 000 individual loans can be granted under the scheme.
In order to get the loan, the borrower must have a deposit of 10% of the amount to be borrowed. Seven and a half percent of this is returned to the borrower on repayment of the loan. It is preferable if the bank can see that the borrower has been saving regularly to build up this deposit, even if it is in the form of a stokvel or home savings club.
"The applicants must have an income and must be able to repay the loan, and the banks will do their normal credit checks before extending loans under this scheme," explained Adrienne Egbers, Senior General Manager of the HLGC.
However efforts have been made to make the loan application process as user‑friendly as possible.
People can approach the developer or contractor directly, and will be assisted to fill out the application forms which will then be forwarded to one of the participating financial institutions.
A three-day "cooling off" period applies, which means a person who has obtained a loan can withdraw from their obligations within three-days of signing the contract should they change their mind.
The HLGC will facilitate training workshops for successful applicants to ensure that they understand their obligations in terms of the loan, and that they spend the money wisely to add value to their homes.
The HLGC is a Section 21 company established in 1989 to facilitate access to housing finance for lower income people. To date guarantees on more than 40 000 loans to the value of R1,2 billion have been provided by the HLGC.
Financial institutions participating in the Cato Manor loan guarantee scheme are: Southfin Bank, Unibank, Ithala Bank, Khosela Bank, Protea Finance and Rural Finance.
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