Tipping Point

A tipping point is defined as “a series of small changes or events that collectively become significant, causing a critical, larger shift and change in direction.”

South Africa has reached a tipping point, as the established financial institutions are no longer able to do business with large percentages of our population.

Yet, the need for credit is still a reality.

Of the 25 million credit-active South Africans, less than 15 million are considered credit worthy. As well, a high percentage of the 15 million credit worthy clients have low credit scores, resulting in fewer successful credit applications.

The language often used to describe those not qualifying for credit is ‘Blacklisted’. The more legally accurate terminology is ‘not Credit worthy’.

The SA debt hole is now deep and the financial system is like loose sand, making it hard for even the diligent to climb out.

Why? Well, it’s about affordability. This has become the greatest obstacle to more credit.

To put it bluntly, we want more than we can afford. It is not possible to have more credit when there is no more disposable income. It is simple math. Someone has to face the facts.

The DILEMMA

The dilemma is that we have a mass of people who are debt burdened, who cannot afford more credit, and financial institutions who have a shrinking market and cannot manage further risk.

And when our credit worthy clients are successful in a credit application, their credit score will determine what rate they will receive from the lender. You guessed it, yes, not many have a good credit score, and therefore, are charged higher rates.

Right now, our interest rates are one of the highest in the world.

These factors have led to the Tipping point.

The SOLUTION

Where to now?

We need a new type of client and a new lender.

1. We need a client who is growing in his or her understanding about money. Growing is the key word. We grow into thinking healthily about money step by step. Healthy thinking and values will give birth to wholesome financial goals that are reasonable. Cause and effect has to be rediscovered - discipline in spending - so that the greater good can be achieved. Our financial intelligence needs to be developed, and it can be.

2. We need lenders who will be willing to be part of this maturing process and part of the solution. They will understand the client, and will have a long –term vision.

Who will structure deals that are profitable and move the client forward?Surely the lender is meant to be able to plan and see the future with the client.

Why are we, ‘biting the hand that feeds us’? If we want an economy that will produce, we need to nurture her and strengthen her. If these values are not embraced, it will cause both the rich and the poor to suffer. A healthy attitude towards money will benefit all and help establish a healthier South Africa.

In the meantime, new, innovative ways of meeting real financial needs will begin to emerge.

A SPECIFIC SOLUTION: RENT TO OWN OR RENT TO BUY

One of these ways, surfacing in the motor vehicle trade, is called the Rent to Own or Rent to Buy way of doing business.

The correct legal term would be 'long term lease' or 'rent of vehicle with option to buy'.

This seems just a play on words, however terminology determines practice, and practice can determine if a business is illegal or legal. With this said, long term rental with option to buy is revolutionary and has opened doors, providing transport for many clients who earn good money, but who have a low credit score or are not credit worthy. The option to buy means that good money spent can result in ownership of an asset. If managed correctly, long term rental with option to buy can forward the financial health of the client.

• Provides transport to earn money
• Empowers towards ownership of an asset
• Creates a record of payment that can leverage further healthy credit

With this in mind, RentaDEAL is a business which will serve the needs of customers who cannot be financed through the banks or lending institutions, yet who are in need of vehicles to meet their daily work and leisure concerns.

This is one of the innovative ways South Africans are doing business today. RentaDeal for South Africans.