7 things you need to know about debt in South Africa

 ·25 Aug 2015
Debt drowning

Statistics compiled by debt management firm, Debt Rescue show that South African consumers owe the bulk of their monthly salaries to creditors.

The group found that consumers owe as much as three quarters (75%) of their monthly pay to creditors, marking a 31% jump in new clients in need of debt rescue in the first six months of the year.

“This is clear evidence that a growing number of consumers are getting ever deeper into debt and need help from debt counselors to get out from under the debt mountain most of them had accumulated over the past years,” said Debt Rescue CEO, Neil Roets.

Seven findings about debt in South Africa:

  • Consumers owe as much as three quarters (75%) of their monthly pay to creditors;
  • More than half (53%) of respondents are in the age group 31-45, and there is a substantial spike (39%) in applicants who want to go under debt review who are under the age of 25;
  • Consumers who are struggling to pay their home loans currently stand at 56.86%;
  • Consumers who are battling to pay off their credit card debt are running at 58.83%;
  • As much as 38.67% of consumers who have a bank accounts do not know what interest rate they are getting on their savings accounts.
  • 22.19% of consumers have no idea of what they’re paying in banking fees;
  • Only 23.42% of South Africans have any money left at the end of the month- the other 76.58% are flat broke.

Further, Debt Rescue found that South Africans are “woefully ignorant” of their rights in relation to expired (prescribed) debt that does not have to be repaid, and the fact that credit providers are not allowed to collect on this debt.

“(This) is indicative of a lack of education and awareness of how important it is to understand at least the basics of financial management,” Roets said.

“We have found in our dealings with thousands of deeply indebted consumers over the years that a lack of understanding of simple things like credit agreements that were often very one sided and downright unfair played a major role in consumers becoming over-indebted in the first instance.”

Earlier data from the South African Human Rights Commission (SAHRC) showed that, of 19 million credit active consumers in South Africa, over half had impaired credit records, three months plus in arrears.

More than 11 million of South Africa’s credit active consumers were described as over-indebted, the SAHRC said.

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