Demand for credit climbs as SA consumers seek personal loans, credit cards - report

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Throughout the pandemic, TransUnion's data showed reduced credit demand from consumers while lenders' appetite to open new accounts also dwindled. But that might be changing.
Throughout the pandemic, TransUnion's data showed reduced credit demand from consumers while lenders' appetite to open new accounts also dwindled. But that might be changing.
Mladen Zivkovic/ Getty

Almost a third of South African consumers plan to apply for new credit or refinance their existing debt in the next 12 months, the latest TransUnion report shows.

The credit bureau published the South Africa Industry Insights Report for the second quarter of 2021 on Tuesday. The report showed that the overall number of consumers participating in the credit market has not materially grown compared to pre-pandemic levels. It remained flat year-on-year.

But this was a change from earlier in the lockdown. TransUnion said throughout the pandemic, its data showed reduced credit demand among consumers, while lenders' appetite to open new accounts also dwindled.

The company said while this continued in the second quarter of 2021, the research it undertook afterwards showed that fewer consumers expected their household finances would fully recover in the next 12 months.

Just under a third (31%) of consumers said they would apply for new credit or refinance existing credit within the next year to stay afloat. Among those planning to take on new credit, personal loans (43%) and new credit card (35%) applications topped the list.

Even in the second quarter, while there were fewer new credit originations year-on-year across all products, those with existing credit lines were using them more.

TransUnion's data showed that the total amount borrowed by consumers, as measured by outstanding balances, continued to increase.

"In the unsecured lending space, balance growth is reflective of the liquidity provided by these products and suggests that financially impacted consumers are utilising these much-needed sources to help balance household finances," wrote the credit bureau in the report.

For secured lending products, like home loans and vehicle finance, where consumer accounts increased by 4.6% and 2.7%, respectively, TransUnion said this growth shows signs of a rebound in the credit market.

In recent quarters, a rise in delinquencies had also contributed to growth in consumers' outstanding balances. Credit card delinquencies in particular reduced to the same level recorded in the second quarter of 2019.

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