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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
