Specialist loan provider DirectAxis has found that South Africans are increasingly turning to personal loans to cover essential needs rather than spending on luxury items.
The findings form part of research conducted through Pulse, a digital platform that allows consumers to check and monitor their credit scores and financial health.
Unsecured credit often used as a financial safety net
The study suggests that unsecured credit is often used as a financial safety net when households face economic shocks, such as rising living costs, job losses or unexpected expenses.
The research revealed that the South African economy tends to experience economic shocks, making unsecured credit stabilisers for households.
About 28% of the 21,000 polled users said the loans were used for emergencies and unexpected financial events such as medical costs, urgent home repairs or family crises.
Emergencies, renovations, education
Another 20% of respondents said they used personal loans to renovate their homes, while 11% spent loans to fund education-related expenses such as tuition fees, study materials and accommodation.
About 10% of respondents indicated that they used personal loans to start a business, suggesting that unsecured credit is also playing a role in supporting small-scale entrepreneurship and informal economic activity.
According to Yasmin Abrahams, DirectAxis CEO, “What’s reassuring is that the vast majority of respondents are not using unsecured credit to fund unnecessary expenditure.”
Personal loans are easier to access, get approved
The research also found that most respondents used personal loans because they were easier to access and easier to get approved compared to other forms of credit, such as vehicle finance, mortgages or store cards.
In some cases, it also reflected limited access to traditional forms of lending.
‘Unsecured lending is helping consumers’
About 30% of respondents indicated that they took out a personal loan because they could not get approval for other types of credit, highlighting the role unsecured lending plays in providing financial access to consumers who may not meet the stricter requirements of conventional credit products.
Abrahams said 26% applied for a personal loan when occasionally faced with unexpected expenses. However, 21% of personal loan users apply monthly to make ends meet, indicating that a portion of borrowers rely on credit as a recurring financial support mechanism.
The findings also show that not all users of the Pulse platform are actively borrowing, with many simply using the tool to keep track of their financial standing and improve their credit awareness.
“It’s notable that a significant portion of Pulse users are engaging with the tool to monitor their financial health without necessarily borrowing.
“At the same time, those who rely on credit to make ends meet could benefit from the budgeting tools and guidance available on Pulse, which are designed to help people make more informed financial decisions,” Abrahams added.
