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IOL News
19-05-2025
- Business
- IOL News
More South Africans are relying on personal loans as cost of living soars
More South Africans than ever are using personal loans to make up the shortfall between income and the rising cost of living. Image: TungArt7/Pixabay Although consumer confidence has improved and the rollout of the 'two-pot' retirement system has provided some financial relief, more South Africans than ever are using personal loans to make up the shortfall between income and the rising cost of living. The newly released DebtBusters Q1 2025 Debt Index shows that a staggering 91% of consumers who sought debt counselling in the first quarter of the year reported having a personal loan. DebtBusters executive head, Benay Sager, said it is clear that while consumers may feel a little more positive, personal loans, especially one-month loans, remain a lifeline for many, because income has not kept pace with rising expenses. The past nine years have seen staggering increases in essential costs: electricity tariffs have skyrocketed by 135%, petrol prices have surged by 88%, and cumulative inflation hovers at 52%. As a result, consumers who pursued debt counselling in Q1 2025 needed, on average, a daunting 69% of their take-home pay to service their debts—the highest percentage observed since 2017. Strikingly, those earning R5,000 or less monthly utilise an overwhelming 76% of their income to pay down debt, while individuals with earnings above R35,000 allocate an astonishing 77% for the same purpose. These figures represent the highest debt-servicing ratios recorded since DebtBusters began analysing consumer behaviour in 2016. Comparing today's consumers to those in 2016 reveals a concerning decline in purchasing power, which is now 53% lower. Although inflationary pressures appear to have lessened, the average nominal incomes for incoming cohorts remain 1% below 2016 levels. Conversely, there is a silver lining for top earners, as those making R35,000 or more have experienced an 11% increase in nominal income since 2016 for the first time in several years. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ Unfortunately, the burden of debt remains pervasive across most income brackets. Consumers are diverting 25% of their disposable income—after servicing their debts—toward essential expenses such as water, electricity, rates, and transport. In the wake of food inflation, many families have been forced to forgo crucial insurance and assurance cover. Lower-income groups particularly feel the pinch, facing 2% to 4% higher inflation over recent years, predominantly due to the rising cost of staple food items. Top earners, too, grapple with unsustainable levels of unsecured debt. On average, this demographic's unsecured debt has soared by 34% over the last nine years, with a staggering 90% increase observed among those earning R35,000 or more—the highest level recorded to date. Sager notes that interest in debt counselling has been 'a bit muted' compared to previous years, attributing this to a mix of uncertainty about the macroeconomic landscape, access to retirement funds, and negative perceptions surrounding debt counselling. Nevertheless, he stresses that debt counselling remains the best option for consumers seeking to restructure their debts effectively. 'While the average interest rate for unsecured debt has decreased from an eight-year high to 25.3%, under debt counselling, it can be reduced to approximately 2.5% per annum,' Sager explains. This reduction not only allows consumers to repay cripplingly expensive debt more swiftly but also mitigates the burden of vehicle debt and balloon payments by negotiating interest rates on financed vehicles down from 14.9% a year to a more manageable level. The trend towards proactive debt management is beginning to change the narrative, as the number of consumers completing debt counselling has increased elevenfold since 2016. In Q1 2025, those who received clearance certificates managed to repay over R700 million to their creditors, signalling a positive shift in financial responsibility. Amidst a growing concern, interest in online debt management tools has surged by 6% compared to the same period last year, with subscriptions to DebtBusters' proprietary online tools, Debt Radar and Debt Sustainability Indicator, surpassing a remarkable 1 million. IOL
The South African
19-05-2025
- Business
- The South African
Personal loans hit record high in South Africa as cost of living bites
A growing number of South Africans are turning to personal and payday loans to stay afloat, as the rising cost of living continues to outpace stagnant incomes. A new report from DebtBusters reveals that a staggering 91% of individuals applying for debt counselling in early 2025 had at least one personal loan – the highest percentage ever recorded. DebtBusters' head, Benay Sager, warned that this trend signals a deepening financial crisis, especially among middle- and upper-income earners who are now under increasing pressure. 'Basically, eight out of every 10 rands earned by top-income earners applying for debt counselling are being spent on debt repayments,' Sager said. 'That's the highest we've ever seen. It reflects the severe financial strain facing even those who are traditionally better off.' Although some indicators – like consumer confidence – have shown slight improvement, the financial burden remains immense. Essentials such as electricity, fuel, and food have seen sharp price hikes, while household incomes have remained virtually flat. One of the report's most surprising findings is that debt is growing fastest among the country's highest earners. Traditionally seen as more financially resilient, this group is now increasingly reliant on borrowing to maintain their lifestyles or cover basic expenses. 'This group is under severe pressure,' Sager emphasised. 'The fact that such a high-income bracket is so leveraged shows how widespread the impact of the cost-of-living crisis has become.' The report paints a sobering picture of South Africa's economic health. With many households resorting to short-term borrowing at high interest rates, financial experts warn that without interventions – such as improved wage growth, energy cost control, and inflation relief – more South Africans could be pushed into unsustainable debt cycles. As debt becomes the only option for many South Africans to survive rising costs, financial advisors are urging consumers to prioritise budgeting, seek professional debt advice early, and avoid high-risk lending solutions where possible. Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1 Subscribe to The South African website's newsletters and follow us on WhatsApp, Facebook, X and Bluesky for the latest news.
The Citizen
18-05-2025
- Business
- The Citizen
Record number of South Africans turn to personal loans as cost of living outpaces income
Although consumer confidence has improved and the rollout of the 'two-pot' retirement system has provided some financial relief, more South Africans than ever are using personal loans to make up the shortfall between income and the rising cost of living. Rising Sun reports that DebtBusters' quarter 1 (Q1) 2025 Debt Index found that 91% of consumers who applied for debt counselling in the first quarter had a personal loan, a new record. A further 37% had a one-month loan – also known as a payday loan. 'It's clear that while consumers may feel a little more positive, personal loans, especially one-month loans, remain a lifeline for many, because income has not kept pace with rising expenses,' explains Benay Sager, executive head of DebtBusters. Over the past nine years, electricity tariffs have increased by 135%, the price of petrol has risen by 88%, and the compound effect of inflation is 52%. As a result, consumers who applied for debt counselling in Q1 2025, on average, needed 69% of their take-home pay to service debt. This is a significant increase compared with previous quarters and the highest since 2017. The most vulnerable consumers, taking home R5 000 or less per month, use 76% of their income to repay debt. Those earning R35 000 or more spend 77% servicing debt. The ratios for these income groups are the highest since DebtBusters started analysing the data in 2016. Compared with 2016: Today's consumers have 53% less purchasing power. Although the impact of inflation has recently subsided, average nominal incomes of incoming cohorts are now 1% lower than 2016 levels, and cumulative inflation over the nine years is 52%. There's better news for those taking home R35 000 or more. For them, nominal income has increased by 11% since 2016 – the first significant growth for some time. Consumers in most income brackets spend 25% of their disposable income, after debt repayments, to pay for water, electricity, rates and transport. Food inflation has meant many have had to sacrifice insurance and assurance cover. For people in lower-income groups, who spend a larger portion of their income on food, food inflation has meant that they have experienced 2% to 4% more inflation over the past few years. Top earners have unsustainable levels of unsecured debt. On average, unsecured debt levels are 34% higher than nine years ago, but for people taking home R35 000 or more, it has increased by 90% – the highest ever. Sager says that debt counselling enquiries were 'a bit muted' compared with previous years. He attributes this to uncertainty about the macroeconomic environment, access to retirement funds and some negative marketing against debt counselling. 'Debt counselling is still the best way to help consumers restructure their debt. While the average interest rate for unsecured debt has come down from an eight-year high to 25.3%, under debt counselling, it can be reduced to ~2.5% per annum, allowing consumers to repay expensive debt faster. Vehicle debt and balloon payments can also be paid over a meaningful period by getting the average financed vehicle interest rate of 14.9% a year negotiated down to a more manageable level,' Sager says. The number of consumers who completed debt counselling has increased 11-fold since 2016. Consumers who received their clearance certificates in the first quarter of 2025 paid back over R700m to their creditors. Sager says that interest in online debt management was up by 6% during the quarter, compared with the same period over a year ago, with subscriptions for DebtBusters' online proprietary tools, Debt Radar and the Debt Sustainability Indicator, now exceeding R1m. Breaking news at your fingertips… Follow Caxton Network News on Facebook and join our WhatsApp channel. Nuus wat saakmaak. Volg Caxton Netwerk-nuus op Facebook en sluit aan by ons WhatsApp-kanaal. Read original story on At Caxton, we employ humans to generate daily fresh news, not AI intervention. Happy reading!
The Citizen
14-05-2025
- Business
- The Citizen
Most South Africans ever use personal loans to make ends meet
If it was not for personal loans and pay-day loans, many South African consumers would not be able to afford food and other necessities. Almost all South Africans who applied for debt counselling use personal loans to make ends meet, despite an improvement in consumer confidence and the rollout of the two-pot retirement system that provided some financial relief. Consumers are using personal loans to make up the shortfall between income and the rising cost of living. Unlike the minister of finance, who can use taxes to make up the budget deficit, they have no other avenues to plug the shortfall. According to the DebtBusters' Debt Index for the first quarter of 2025, 91% of consumers who applied for debt counselling in the first quarter had a personal loan, a new record for the number of applicants who have a personal loan. Another 37% had a one-month loan, also known as a payday loan. Benay Sager, executive head of DebtBusters, says it is clear that while consumers may feel a little more positive, personal loans, especially one-month loans, remain a lifeline for many because their income has not kept up with their increasing expenses. ALSO READ: South Africans reliant on loans to keep heads above water Price increases since 2016 made it impossible to live without personal loans Over the past nine years, electricity tariffs increased by 135% and the price of petrol by 88%, while the compound effect of inflation is 52%. As a result, consumers who applied for debt counselling in the first three months of the year needed on average 69% of their take-home pay to service their debt. Sager points out that this is a significant increase compared to previous quarters and the highest since 2017. The most vulnerable consumers, taking home less than R5 000 per month, use 76% of their income to repay debt, while people earning more than R35 000 spend 77% of their income to repay their debt. According to Sager the ratios for these income groups are the highest since DebtBusters started analysing the data in 2016. ALSO READ: What you need to know about personal loans Consumer debt in 2025 compared to 2016 shows why consumers have personal loans Compared to 2016: Consumers now have 53% less buying power. Although the impact of inflation subsided recently, the average nominal income of incoming groups is now 1% lower than in 2016, and cumulative inflation over the nine years is 52%. However, there is better news for people taking home more than R35 000 per month as their nominal income increased by 11% since 2016, the first significant growth for some time. Consumers in most income bands spend 25% of their disposable income after paying their debt to pay for water, electricity, rates and transport. Food inflation has meant many had to sacrifice insurance cover. For people in lower-income groups, who spend a larger portion of their income on food, food inflation meant that they experienced inflation of 2% to 4% higher over the past few years. Top earners have unsustainable levels of unsecured debt. On average, unsecured debt levels are 34% higher than nine years ago, but for people taking home more than R35 000 per month, it increased by 90%, the highest ever. ALSO READ: Is the interest on your personal loan within legal limits? Here's how to find out Fewer enquiries about debt counselling Sager says debt counselling enquiries were 'a bit muted' during the first quarter of 2025 compared to previous years. He attributes this to uncertainty about the macroeconomic environment, access to retirement funds and 'some negative marketing against debt counselling'. 'Debt counselling is still the best way to help consumers restructure their debt. While the average interest rate for unsecured debt has come down from an eight-year high to 25.3%, under debt counselling, it can be reduced to ~2.5% per year, allowing consumers to repay expensive debt faster. 'Vehicle debt and balloon payments can also be paid over a meaningful period by getting the average financed vehicle interest rate of 14.9% a year negotiated down to a more manageable level.' According to Sager, the number of consumers who completed debt counselling increased 11-fold since 2016. Consumers who received their clearance certificates in the first quarter of 2025 paid back over R700 million to their creditors. 'Interest in online debt management was up by 6% during the quarter compared to the same period last year, with subscriptions for DebtBusters' online proprietary tools, Debt Radar and the Debt Sustainability Indicator, now exceeding 1 million.'
IOL News
13-05-2025
- Business
- IOL News
More South Africans turn to personal loans as income is eroded by rising expenses
Rising expenses push South Africans towards personal loans Image: Karen Sandison Consumers are increasingly feeling the pinch with a record number of people who are now in debt review having a personal loan. The latest DebtBusters' Debt Index for the first quarter of the year showed that more South Africans than ever are using personal loans to make up the shortfall between income and the rising cost of living. This, it said, is despite South Africans having access to some of their retirement savings in the form of the 'two-pot' retirement regime. However, Benay Sager, executive head of DebtBusters said that debt counselling enquiries were 'a bit muted' compared to previous years. He attributed this to uncertainty about the macroeconomic environment as well as access to retirement funds. The number of consumers who completed debt counselling has increased 11-fold since 2016. Consumers who received their clearance certificates in the first quarter of 2025 paid back over R700 million to their creditors. This comes as Statistics South Africa released its unemployment figures, also on Tuesday, which showed that the unemployment rate has increased to 32.9% from the last three months of 2024, when it was 31.9%. The overall unemployment rate, which includes discouraged job seekers, went from 41.9% to 43.1%. DebtBusters' research also found that 37% of people applying for debt review had a one-month loan - also known as a payday loan. These increases in debt come as consumers are less optimistic about South Africa's economic environment, with the FNB/BER Consumer Confidence Index dropping to its lowest point since the second quarter of 2023 as of the first three months of the year. Sager pointed out that 'personal loans, especially one-month loans, remain a lifeline for many, because income has not kept pace with rising expenses'. Over the past nine years, electricity tariffs have increased by 135%, the price of petrol has risen by 88%, and the compound effect of inflation is 52%, DebtBusters pointed out. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ As a result, those who applied to the company for debt counselling in the first quarter of this year were using an average of just more than two-thirds of their net salary to pay debt, the debt review company said in a statement. 'This is a significant increase compared to previous quarters and the highest since 2017,' it added. 'The most vulnerable consumers, taking home R5 000 or less per month, use 76% of their income to repay debt. Those earning R35,000 or more spend 77% servicing debt. The ratios for these income groups are the highest since DebtBusters started analysing the data in 2016,' it noted. DebtBusters added that today's consumers have 53% less purchasing power than in 2016. However, for those taking home R35,000 or more, nominal income has increased by 11% since 2016 – the first significant growth for some time. Consumers in most income bands spend 25% of their disposable income, after debt repayments, to pay for water, electricity, rates and transport. Food inflation has meant many have had to sacrifice insurance and assurance cover, said DebtBusters. IOL
