Rising Debt Levels Drive More Consumers, Study Finds

South African consumers continue to sink into debt, according to the latest data. A study by Genesis Analytics, in partnership with the Financial Sector Conduct Authority, found that “over-indebtedness remains a challenge in South Africa”.

The research found that more than half of credit-active South African consumers are deep in the red, leading to bad credit for 48% of all borrowers.

Sebastien Alexanderson, Founder and Debt Advisor at National Debt Advisors, says money troubles don’t just affect consumers’ pockets, but they also affect your emotional, physical and mental well-being.

“The market research consultancy classifies people who are forced to pay more than 70% of their income to go into debt as over-indebted. The trick to staying debt free is to start with the most basic financial step – just set a budget and stick to it as much as possible,” Alexanderson said.

Data from DebtBusters’ first quarter Debt Index shows that in real terms, South Africans now have 31% less disposable income than six years ago.

The study further suggests that consumers make up for the shortfall in real income by borrowing – and for those earning over R20,000 per month, unsecured debt has also increased by 54% since 2016, while their ratio debt/income is now at a mind-boggling 150%.

DebtBusters further found that for those who take home more than R10,000 per month, the ratio is 125% and it is 150% for those with a net income of R20,000 or more per month.

Benay Sager, head of DebtBusters, said consumers make up for lost real income by borrowing.

“In these circumstances, consumers should do everything possible to reduce the cost of credit and protect their assets. For those who cannot do it without help, debt counseling is the best option available. »

Five tips for getting out of debt:

  1. Pay more than the minimum payment

Review your budget and decide how much extra you can spend on your debt. Paying more than the minimum will save you money on interest and help you get out of debt faster.

  1. Refinance debt

Refinancing debt at a lower interest rate can save you hundreds in interest and help you pay off your debt faster. You can refinance mortgages, car loans, personal loans and student loans.

  1. Commit windfall gains to debt

When you get a tax refund or bonus at work or overtime, add the money to your loans instead of saving it in your bank account or splurging on yourself.

  1. Settle for less than you have to

You can also call your creditors and negotiate a settlement of your debts, usually for much less than what you owe. While it’s possible to take care of this yourself, a range of third-party companies also offer debt settlement services for a fee.

  1. Revisit your budget

There are two ways to pay off your debt faster: earn more or spend less. It may not be possible to land a part-time job or a side hustle, but you can make adjustments to your budget.

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Kabelo Khumalo

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