Cash-strapped South African consumers are becoming over-indebted sooner and with far fewer credit agreements than they did before, Benay Sager, DebtBusters' chief operating officer tells Fin24.
He commented on DebtBusters' latest quarterly analysis of its clients, which shows that it is not just people with unsecured debt who are finding it hard to make ends meet.
DebtBusters has seen an increase in South Africans turning to debt counsellors to help them manage their credit. Overall debt levels - the total debt exposure to annual net income - have increased to 107%.
Furthermore, over the last four years, since the start of the quarterly report, the number of consumers with assets such as vehicles or homes who are seeking debt counselling has increased from 49% to 56%.
"People who earn less than R5 000 a month need 63% of their income to repay their creditors. They are also charged the most interest. Those who earn over R20 000 a month have debt levels of on average 133% of their net annual income," says Sager.
"What is concerning, is that when consumers apply to debt counselling, their average debt repayment to net income figure is 61%, well above sustainable levels."
A debt report by the IDM Group shows that the average age of people looking for debt relief has remained consistent at 37 years old. Women make up 47% of these new applicants.
The report also found that consumers in the 25 to 39 age group are the most active borrowers, while those in the 40 to 59 age group still take out larger loans on average.
Neil Roets, CEO of Debt Rescue, warns tat deeply indebted consumers should think long and hard before plunging themselves even deeper into debt by splurging on luxury goods on the upcoming Black Friday. Taking place on the last Friday of November, many retailers and e-commerce sites promise special deals.
"Often deals offered by major retailers seemed so good that consumers throw caution to the wind and blow their entire Christmas budget on single expensive items such as high-end TVs and other domestic appliances," commented Roets.
"For the past several years we have seen the impact that Black Friday and Christmas shopping sprees have had on consumers when they approached us to try and get them out from under the financial mess that reckless spending has caused."
He has seen a growth rate of 21% this year in consumers who have applied for debt review compared to the same period last year.
"This is way above normal and clearly showed that consumers were in deep trouble. Gross consumer debt is currently at around R1.9trn," says Roets.
"According to the National Credit Regulator almost half of all consumers were three months or more behind in their repayments. The major culprits were credit and store cards followed closely by unsecured debt."