South Africans are having to take out large loans to make ends meet.
This is because of a decline in net income, in real terms. So says debt counselling firm DebtBusters, which said there had been an increase in consumers taking out credit since 2015 to cover shortfalls.
This is as the average debt levels increased by 13 percentage points more than average income levels, according to DebtBusters.
The organisation made the revelation on Friday after its latest report, which covered the last quarter of 2019.
DebtBusters COO Benay Sagar said the report found that people who applied to the company for debt counselling during 2019 had, on average, 15% less real net income compared with those who applied in 2015.
“The picture for higher-income earners — those pocketing more than R20,000 a month — was worse. These consumers were bringing home 20% less in real terms than their counterparts in 2015,” said Sagar.
The organisation said high earners were funding their lifestyles by taking out “considerable unsecured credit ... to the extent that this is beginning to outweigh asset finance, such as home loans and car finance”.
“On average, unsecured debt levels are 40% higher on what we were seeing four years ago. For higher-income earners it is 50% up.”
The organisation said the proportion of income required to service debt was a clear indication of the financial strains consumers were facing.
In the last quarter of 2019, clients needed 64% of their net income to repay debts.
The average client’s debt-to-income ratio was 110%, but for those earning R20,000 or more a month it was 134% and this was deemed unsustainable.
“This is unsustainable, and it’s become worse over the past four years. It is why we’ve declared February as National Debt Awareness Month,” added Sagar.
The organisation urged consumers to recognise the early warning signs they may be over-indebted and to seek help.
It also urged consumers to learn from others who had been overburdened by debt and successfully achieved financial freedom.
“Despite the concerning high level of over-indebtedness, the good news is that SA has a sophisticated and effective debt counselling sector. The number of clients successfully completing debt counselling has increased by 60% a year over the past four years. There’s no doubt that it works well to help people escape the burden of debt,” he added.
South Africans taking out loans to cover income shortfalls, says debt counselling firm
Image: 123rf.com/Jason Cox
South Africans are having to take out large loans to make ends meet.
This is because of a decline in net income, in real terms. So says debt counselling firm DebtBusters, which said there had been an increase in consumers taking out credit since 2015 to cover shortfalls.
This is as the average debt levels increased by 13 percentage points more than average income levels, according to DebtBusters.
The organisation made the revelation on Friday after its latest report, which covered the last quarter of 2019.
DebtBusters COO Benay Sagar said the report found that people who applied to the company for debt counselling during 2019 had, on average, 15% less real net income compared with those who applied in 2015.
“The picture for higher-income earners — those pocketing more than R20,000 a month — was worse. These consumers were bringing home 20% less in real terms than their counterparts in 2015,” said Sagar.
The organisation said high earners were funding their lifestyles by taking out “considerable unsecured credit ... to the extent that this is beginning to outweigh asset finance, such as home loans and car finance”.
“On average, unsecured debt levels are 40% higher on what we were seeing four years ago. For higher-income earners it is 50% up.”
The organisation said the proportion of income required to service debt was a clear indication of the financial strains consumers were facing.
In the last quarter of 2019, clients needed 64% of their net income to repay debts.
The average client’s debt-to-income ratio was 110%, but for those earning R20,000 or more a month it was 134% and this was deemed unsustainable.
“This is unsustainable, and it’s become worse over the past four years. It is why we’ve declared February as National Debt Awareness Month,” added Sagar.
The organisation urged consumers to recognise the early warning signs they may be over-indebted and to seek help.
It also urged consumers to learn from others who had been overburdened by debt and successfully achieved financial freedom.
“Despite the concerning high level of over-indebtedness, the good news is that SA has a sophisticated and effective debt counselling sector. The number of clients successfully completing debt counselling has increased by 60% a year over the past four years. There’s no doubt that it works well to help people escape the burden of debt,” he added.
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