South Africans are lending more money to offset their loss of income during the Covid 19 pandemic. This is how a debt report by the debt counseling organization DebtBusters shows.
South Africans’ net income even before the outbreak of the Covid-19 pandemic has dropped significantly in real terms and consumers are justifying the shortfall by borrowing money.
According to the report, people who applied for debt counseling with the company in the first quarter of the year received an average of 18% less real net income compared to those who applied in 2016. This is due to the accumulated inflation rate of 19%.
DebtBusters chief operating officer Benay Sagar says average debt levels have increased significantly, with total debt increasing by 33% compared to the same period in 2016. Total debt for those earning higher income in the first quarter increased by 63% up compared to their peers in the same period in 2016.
The report also indicates the number of consumers with household and vehicle financing applying for debt counseling has also grown significantly.
“The debt-to-income ratio of the client earning R20 000 or more per month was 142%. It is unsustainable and deteriorates annually, ”says Sagar.
Sagar says the number of credit accounts consumers had when applying for debt counseling shows that they are making too much debt faster, but have also called for help sooner.
“Debt counseling is incredibly effective. The number of clients who successfully completed the process has increased by 65% per year over the past four years. The process works, and is a fantastic tool to help consumers overwhelmed by debt, ”says Sagar.