Consumer debt in South Africa- the true story
According to recent studies, South Africans have been found to be among the world’s biggest borrowers. In a world where accessing credit has become much easier, for many people facing financial challenges, this often seems like the simplest solution.
More individuals in this country are relying on credit for getting them out of trouble. Households earning more money are more likely to have accumulated debt
An alarmingly higher number of individuals in households across the country are also living beyond what they can realistically afford, which has also contributed significantly towards consumer debt in the country.
Statistics say that more households are failing to manage their debt effectively. As many as 10 million credit-active consumers in South Africa have impaired credit records, while the Gauteng Province has the most-indebted citizens.
According to economists, the level of consumer debt a country is able to support is dependent on the health of the underlying economy. So if on an individual level, consumer debt in South Africa is unhealthy, this will have effects on a macroeconomic level.
Credit use is outpacing employment growth. This means that an increasing number of individuals are opting to use credit lines such as personal loans and credit cards. A greater number of people are being approved for home loans, which is often regarded in more of a positive light. The distinction between “good and bad debt” is often not considered too much when credit is needed.
According to recent statistics, as much as 75% of monthly pay is going towards paying debt off for South African households.
In 2013 there were 20.21 million people with access to credit. In 2017, South Africa had 24.31 million individuals using credit solutions. The type of credit varied greatly too. 65% of consumer debt is for credit cards, overdrafts and store cards.
2 out of 5 credit-active consumers have credit records that are damaged. Consumer debt requires individuals to pay their debts back on time, so when this doesn’t happen, this results in negative effects for credit records.