SA plagued by personal debt

2019-05-06 10:31

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South Africans are being crushed under the weight of personal debt, with consumer debt totalling nearly R1,7 trillion — nearly as much as the government’s debt of more than R2 trillion.

Numerous banks and debt counselling organisations have warned that South Africans need to start handling their money better and to urgently begin settling personal debt.

Making matters worse is that South Africans generally don’t take to putting money aside for savings, with research by the World Bank saying that as many as one third of adults do not dedicate any money toward savings.

The World Bank’s Global Findex Database showed that South Africans are among the top borrowers in the world.

CEO of Debt Rescue, Neil Roets, said they were seeing more and more people resorting to credit to feed their families.

He said their clients were increasingly falling behind on debt repayments.

“We are seeing daily records being set by the number of distressed consumers who are knocking on our door to be placed under debt review. We are going to [have to] adapt our lifestyle to adjust to tighter market conditions doing more with less,” Roets said.

First National Bank (FNB) said it noticed its “middle-income” clients spending on average a quarter of their salary to pay just the interest on their debt.

sa debt

FNB’s consumer chief executive, Christoph Nieuwoudt, said clients who had a history of defaulting on debt were shown to have a higher “reliance” on debt. “Consumers are also taking on expensive forms of credit, from multiple providers and potentially at maximum interest rates,” he said.

Credit counselling group Kudough believes South Africans spend about three quarters of all personal disposable income toward paying off debt.

The company said more than half of people in debt struggle to pay it off, and that the average adult is about R70 000 in debt.

Useful Tips on how to handle debt

Priya Naicker, of Old Mutual, gives the following tips to handle debt:

• Start off by drawing up a monthly budget. Knowing where your money is going each month is a critical step. Ultimately, you need to reach a stage where you are in full control of your finances.

• Pay off your highest debt with any spare money you may have.

• Make an arrangement with your creditors. If it doesn’t work, consider consolidating your loans but avoid getting further into debt during this period.

• Take action today to change your behaviour. Procrastination is often your worst enemy and keeps you from taking the small steps that will lead to bigger change.

Using debt to maintain a lifestyle

Local psychologist Clive Willows said people got into “voluntary debt” to maintain a lifestyle.

“Because we live in a society which focuses on consumerism and people’s identities are established by what they have, buying things is a way of maintaining a lifestyle which in reality is not necessary,” Willows said.

He said the first step to recovery is to admit there is a problem and then take steps to eradicate that debt.

“There is a lot of pressure to consume for the sake of status, and people get swept away with that.”

Willows added that another category of people in debt are those who take on debt to survive.

“There will be a lot of feelings of hopelessness and helplessness which are integral to feelings of depression, together with anxiety.”

Read more on:    pietermaritzburg

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