Experts warn of debt timebomb

Cape Town – Over-indebtedness of ordinary South Africans seems to be spiralling out of control.  And while the National Credit Act managed to buffer the effect of the last recession on ordinary consumers, it seems that any lessons learnt by consumers during the recession have gone out of the window.

A recent debt survey done by Fin24 has shown that a mere 2.06% (647) of over 32 000 respondents have no debt. The online survey was run over two weeks to gauge the state of indebtedness in the country.

Two thousand more Fin24 users participated in the survey after the end of the survey period. (Our initial report was for 30 000 respondents.)

The stats also showed that almost 42% (12 522) respondents spend 80% of their income on repaying debt. Almost 2 800 people spend their whole income on debt, while 2 500 people have debt repayments which exceed their income.

The survey also revealed that many people were turning to microlenders and using their retail accounts and credit cards to simply survive. Debt is being incurred on a monthly basis to pay for food, transport, electricity and water.

Over 50% of the respondents earned between R10 000 and R30 000 per month.

“This is middle- and high-income earners and clearly shows that they simply cannot manage their finances,” said debt expert Moeshfieka Botha.

Over-indebtedness among South Africans is continuously increasing. It seems that the level at which South Africans are incurring debt has reached fever pitch, especially with unsecured lending skyrocketing, she said.

Investec economist Annabel Bishop said the average household has 31.8% more unsecured debt than a year ago. This includes credit card debt.

Roger Brown, chief executive of national debt counselling firm Credit Matters, warned consumers to become proactive about their debt before they have no other alternative but to give up their assets.

“People need to step out of the fog of denial and seek solutions to their financial problems before it’s too late.

“We have found that it’s a situation of too little too late... we’ve seen a tremendous increase in the number of people applying for debt counselling.  A large percentage of these people are in serious danger of losing their homes and vehicles.”

Brown expressed concern about how long people take to seek help. “Debt is a ticking timebomb. Consumers should not wait for the bubble to burst before seeking help.

“Creditors, debt counsellors and consumers should be working together within the spirit of the National Credit Act to bring a measure of relief to those who are over-indebted.”

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*More Fin24 survey statistics will be released shortly.

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