Payment holidays offered during the three-month period from April to June 2020 will cost an additional R20.7 billion in debt for the estimated 1.6 million South African consumers who participated.<\/p>\n
This is according to calculations by DebtBusters, South Africa\u2019s largest debt counsellor.<\/p>\n
Benay Sager, DebtBusters\u2019 chief operating officer, said that while payment holidays were very good news for people facing a short-term cash crunch they came at a cost.<\/p>\n
This is as a result of interest accumulating on the debt owed, even though payments were put on hold for a while.<\/p>\n
“We understand that for many consumers payment holidays were a lifeline. For people who were desperate to make ends meet during the hard lockdown, the additional interest may have seemed an inconsequential consideration, but on average a three-month payment holiday will have increased what they owe by 4.2%.<\/p>\n
“That equates to R12,900 over-and-above the original debt for the typical consumer who participated in the payment holidays for three months.”<\/p>\n
DebtBusters\u2019 analysis was conducted based on the profiles of typical consumers who applied for debt counselling over the past year.<\/p>\n
The analysis includes a breakdown of how a three-month payment holiday affected these consumers\u2019 levels of debt:<\/p>\n
\u201cIn a country as over-indebted as South Africa, especially at a time when the economy is contracting, this is enough to push people who were just about making ends meet into a situation where their debt-to-income ratio is unsustainable,” said Sager.<\/p>\n
He said that while these numbers are sobering, people who find themselves struggling to make repayments as a result of increased debt levels or constrained income should seek help sooner rather than later.<\/p>\n
\u201cAlthough some people are sceptical about debt counselling the reality is that in South Africa it is highly regulated and generally very effective.”<\/p>\n