SOUTH AFRICANS ARE LIVING ON DEBT - The dangers of borrowing money to pay Debt

SOUTH AFRICANS ARE LIVING ON DEBT

The dangers of borrowing money to pay

Debt

Stes de Necker

About five million South Africans are battling with over-indebtedness. That is almost 14% of the total number of South Africans older than 16.

The appetite for debt among South Africans has grown even stronger amid low interest rates for the past couple of years.

The number of people with formal credit or loans has increased by 1.1 million a year ago, to 14.2 million. There seems to have been a shift away from informal lending, since fewer people borrowed from informal sources like money-lenders and pawn shops.

Statistics show that the biggest demand for debt come from people who earn in excess of R15,000 per month! 

 Secured loans grew substantially, but were overshadowed by the doubling of the number of people with unsecured loans. Powell said the growth in secured loans includes a small increase in bonds, but is mostly driven by increased car sales.

There is sense that South Africans have gotten comfortable solving their money issues by taking more loans. Instead of solving the issue at hand, they take out another loan as a way to solve the problem.  This in turns deepens their debt and makes the issue a longer lasting larger problem. 

The most troubling aspect of South Africans’ over reliance on credit is that they had become dependent on expensive personal loans to fund their lavish lifestyles.

If one takes into account increasing food inflation, increased fuel and utilities costs and a possible increase in interest rates, it is clear that many South Africans are teetering on the edge of insolvency.