Rising debt levels dragging more consumers under, study reveals

South Africa’s consumers continue to drown in debt, the latest data shows. A study by Genesis Analytics, in partnership with the Financial Sector Conduct Authority, found that “over-indebtedness remains a challenge in SA”.

The research found that more than half of South Africa’s credit-active consumers are deep in the red, resulting in bad credit records for 48% of all borrowers.

Sebastien Alexanderson, founder and debt counsellor at National Debt Advisors, says that money issues are not only affecting consumers’ pockets, but they also affect your emotional, physical and mental wellbeing.

“The market research consultancy classifies people who are obliged to pay more than 70% of their income towards debt as being over-indebted. The trick for staying debt free is to start with the most basic financial step – simply draw up a budget and stick to it as far as possible,” said Alexanderson.

Data from the first quarter Debt Index from DebtBusters shows that in real terms, South Africans now have 31% less disposable income than six years ago.

The study further suggests that consumers are making up the shortfall in real income by borrowing – and for those taking home more than R20 000 a month unsecured debt has also increased by 54% since 2016, while their debt-to-income ratio is now at a mind-boggling 150%.

DebtBusters further found that for those taking home more than R10 000 per month the ratio is 125% and it is 150% for those with take-home income of R20 000 or more per month.

Benay Sager, head of DebtBusters, said consumers are making up the shortfall in real income by borrowing.

“In these circumstances, consumers need to do everything possible to reduce the cost of credit and protect their assets. For those unable to do so without help, debt counselling is the best option available.”

Five tips for getting out of debt:

  1. Pay more than the minimum payment

Go through your budget and decide how much extra you can put toward your debt. Paying more than the minimum will save you money on interest and help you get out of debt faster.

  1. Refinance debt

Refinancing debt to a lower interest rate can save you hundreds in interest and help you repay debt faster. You can refinance mortgages, vehicle loans, personal loans and student loans.

  1. Commit windfalls to debt

When you get a tax refund or bonus at work or overtime money, add the money to your loans instead of saving it in your bank account or splurging on yourself.

  1. Settle for less than you owe

You can also call creditors and negotiate a settlement of your debts, usually for a lot less than you owe. While it’s possible to take care of this yourself, an array of third-party companies also offer debt settlement services for a fee.

  1. Re-examine your budget

There are two ways to pay off your debts faster – earn more or spend less. It may not be feasible to pick up a part-time job or side hustle, but you can make adjustments to your budget.

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