Spike in South African households seeking help – as they turn to debt to manage daily expenses

South African households have less money to spend, and as more try to take out credit to get by, the increased living costs and strained national economy impacts the affordability of their debt negatively.

This also aligns with the findings of the South African Reserve Bank’s (SARB) quarterly bulletin that was released on Wednesday (26 September).

“We’ve seen an increased trend of consumers who already have an average of seven credit agreements, seeking a consolidation solution so that they can free up cash-flow to keep up with the increased living expenses,” said Ian Wason, CEO of debt management company, Intelligent Debt Management (IDM).

As confirmed by the SARB report, the increased VAT from 14% to 15% combined with the fuel price hikes have placed even more pressure on SA households, who have already been turning more to credit just to keep up.

“Both the debt counselling entities in the IDM group – DebtBusters and Consumer Debt Help – are assisting increasingly more consumers with large payday and personal loans, who are now having difficulty to make ends meet,” Wason said.

“September this year has actually seen an unusual spike in debt management enquiries – up to 20% more than last year this time.”

Adding to the increased pressure that already over-indebted consumers are now experiencing in the current economy, the National Credit Regulator (NCR) are also encouraging consumers to consider debt counselling to regain control over their finances.

Manager for debt Counselling at the National Credit Regulator’s (NCR), Kedilatile Legodi recently acknowledged that they too are experiencing many consumers who are unable to pay their monthly debt repayments due to the current recession and the change it causes in consumers’ personal circumstances.

“Consumers in this situation should not hide, feel despondent or despair, they should use the debt relief measure offered by registered debt counsellors,” Legodi said.

The IDM’s data mirrors a report published by Experian through its Consumer Default Index (CDI) which showed that the rate of first-time credit defaults has escalated, particularly over the past nine months, and driven by vehicle finance.

The CDI tracks 14.2 million consumers with 17.9 million active credit card, personal loan, vehicle loan and/or home loans with R1.57 trillion in outstanding debt.

Read: Here’s how much it costs to get debt counselling in South Africa

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Spike in South African households seeking help – as they turn to debt to manage daily expenses