Many South Africans face being blacklisted as they struggle to pay their debt as the costs of living skyrockets.
Increase in fuel prices and interest rates have negatively impactedon consumers.
The Iinflation rate has increased with several struggling to cope.
Findings by DebtBusters, South African debt counsellor, show the pitfall is that consumers only seek debt counselling in deep financial distress – when servicing their debt consumes 62% of their take-home pay.
It was revealed that consumers taking home more than R20 000 per month, on average, have a debt-to-income ratio of 146% and households are increasingly supplementing their earnings with unsecured credit.
The Index states that over the past six years, the average loan size in South Africa has increased by 45%, this despite no increase in real income levels (after inflation) since 2016.
Benay Sager, head of DebtBusters, said 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 increased by an unsustainably high 54% since 2016, while their debt-to-income ratio is now an alarming 150%. “The latest Q1 2022 Debt Index, indicates that in real terms, South Africans have 31% less disposable income than six years ago and this, in addition to a higher debt burden, is fuelling an increased demand for debt counselling.”
Zania Hartman, regional general manager at Momentum Free State, has strongly warned consumers to tighten the belt and consider their priorities.
“Unless South Africans change the way they spend and save money, many face being blacklisted.”
Hartman has cautioned against signing surety for someone else’s debt and not to engage with loan sharks who charge high interest rates.
She advises consumers to opt for debt counselling introduced in the National Credit Act (NCA) in 2007 to assist over-indebted consumers with restructuring of their debt to make repayments manageable.
This service is offered by debt counsellors registered with the National Credit Regulator (NCR) at a fee.
Hartman has advisesd that prudent budgeting and talking to a financial adviser pro-actively can prevent individuals becoming over-indebted.
“Part of budgeting includes paying off debt that attracts the highest interest rate, first. Talk to your financial adviser to tweak your financial plan so that you don’t compromise your long-term financial goals while paying off debt. Then, stay out of debt – if you can’t afford it, don’t buy it. If you didn’t need the item when it was full price, you don’t need it when it’s on sale.”
