Higher-income South Africans have dramatically increased their use of loans, a new report shows
- The debt counselling group DebtBusters says higher-income clients are increasingly funding their lifestyles through unsecured debt, like loans and credit cards.
- This kind of credit is now starting to grow bigger than their payments on home loans and vehicle finance.
- DebtBusters says the debt-to-income ratio among its high income clients has now hit 134%.
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One of SA's biggest debt counselling groups, DebtBusters, has seen a 50% increase in unsecured lending (primarily credit cards and personal loans) among high-income earners over the past four year.
“Consumers are funding their lifestyles by taking out considerable unsecured credit, to the extent that this is beginning to outweigh asset finance, such as home loans and car finance, says Benay Sagar, DebtBusters’ chief operating officer.
DebtBusters found that people who applied to the company for debt counselling during the last three months 2019 had on average unsecured debt that was 40% higher than what was seen four years ago. For higher-income earners (those earning more than R20,000 a month), it was 50% higher.
The average client’s debt-to-income ratio was 110%, but for those earning R20 000 or more a month it was 134%.
According to the National Credit Regulator, around 40% of SA’s 25.7 million credit-active consumers in South Africa had impaired credit records last year.
The DebtBusters report also shows that South Africans’ net income has declined markedly in real terms (after inflation) since 2015.
Its clients had, on average, 15% less real net income compared to those who applied in 2015.
Higher-income earners – those pocketing over R20 000 a month – were bringing home 20% less in real terms than their counterparts in 2015.