A snapshot survey by personal finance website JustMoney has revealed that more than 82% of respondents are in debt ‒ with the need to buy food cited by 43% as a reason for this.
Personal loans are the most common form of debt. Close to 59% of the participants have personal loans, 48% have credit cards, more than 21% have home loans, 17% have vehicle finance, and almost 5% have student loans. The remaining 24% did not specify the kind of debt they had.
Says JustMoney Commercial Manager Sarah Nicholson, "In a bid to find out how indebted South Africans are, we conducted an online survey in November 2020, with 13 questions. It attracted 190 respondents. While this is a small and informal appraisal, it does reflect the extremely concerning situation that many South Africans find themselves in.
"Being in debt in order to buy food is alarming, with research confirming that the pandemic has played a major part in this. We found that the overwhelming majority of respondents, close to 70%, said the pandemic had affected their ability to pay off debt."
Types of loan.
Of the respondents, 63% have one personal loan each, nearly 19% have two, and a little more than 18% have three or more. Just over 85% of the respondents own at least one credit card, while just over 10% own two, and 4% have three or more.
About 55% of the respondents said they were able to manage their debt, however, 58% said they had been in arrears at least once in the past 12 months. Some 43% of the participants had more debt than they had five years ago.
Reasons respondents are in debt.
In addition to the respondents who have accumulated debt at least in part in order to buy food, just over a third (36%) said they took out a loan to pay off existing debt. More than 28% said they were paying off a home loan or vehicle finance.
Around a quarter of participants have defaulted on their payments, and for this reason they remain in debt. A little more than 21% are in debt in order to buy clothes, 20% are paying off school fees, close to 15% are paying medical expenses, while a little more than 14% owe money because they are unemployed.
Close to 13% of respondents mentioned that they are in debt because they are renovating their homes or doing emergency home repairs. More than 8% said they used credit to finance travelling, and just over 5% are paying student debt. Some 15% did not specify why they are in debt.
"About 71% of the participants have been in debt for five years or less, while 29% had been in debt for longer. Around 43% of these respondents said they have more debt than they did five years ago, while 57% said they had less," said Nicholson.
Reaching out for help.
When asked if they were receiving any kind of professional debt help, close to three quarters (78%) said no and the remainder said yes.
"While over half of our respondents (58%) said they would never consider getting professional help for their debt, 42% said they would. The reasons for avoiding help ranged from not needing it, to fearing it would affect their credit score. Some respondents were too embarrassed to reach out for help," says Nicholson.
"With many household budgets stretched to the limit, it is essential to get to grips with your current financial situation and, if necessary, to address your debt situation.
"Warning signs include not being able to keep track of which credit providers you are paying every month, and how much. You find yourself taking out loans to survive the month, and the majority of your income goes to paying off your debt. You may already have a judgment or default against your name."
See answers to frequently asked questions about debt here.
Debt consolidation, which combines a number of individual debts into a single debt at a lower interest rate, can help consumers to get out of difficulties. Find out more here.
"If, like many people, you are already having sleepless nights about debt, do reach out for help and advice," advises Nicholson.
JustMoney is a personal finance website that provides busy and digitally-savvy South Africans with easy access to financial products, services and information. It does this by partnering with trusted financial brands and offering informative, trustworthy advice.