Budget when you need debt help If you find yourself in need of debt help and struggling to make ends meet, it’s likely that your budget (or lack thereof) doesn’t reflect your earnings. Budgeting can prevent getting kicked out of your house, increased debt as well as ruining your credit profile. It’s never too late […]
31 October 2013
DebtBusters COO, Benay Sager, speaks to Elani Giokos at eNCA News about the latest data revealed by the National Credit Regulator in the Credit Bureau Monitor and the Consumer Credit Market Report.
Debtbusters describes the latest data released by the National Creit Regulator as deeply troubling for the South African consumer and also the overall economy. Now the NCR says that over 20 million consumers are active, of which 10 million have impaired credit records. Joining eNCA is Benay Sager, Debtbusters Chief Operating Officer – Elani Giokos.
Thank you very much Benay for joining us. Good to have you on eNCA. We always look at these credit figures and we say that they’re relatively startling. But overall it seems that we’re starting to see a little bit of optimism when you’ve got government coming through and saying that they are planning to look at consumers that have started to pay and looking at better credit records down the line and starting to wipe things off the record. Is this for you one of the positive elements that might be feeding through?
Thank you Eleni for having us.
I mean over whelming the news are not great for the SA consumer, although there is some silver lining. We I think are always cautious because of the trends that we’re picking up from the customers that come to us. The average client that comes to us has R20 000 in income and then they have 12 credit agreements. They have roughly about, you know 89 per cent of their income that they’re paying in debt. Now the news that have come up, you see more and more consumers roughly about 50 per cent of them with impaired credit records, we’re seeing more unsecured debt even though there is a slowdown which is good news. The other piece of good news has been also the increase in the mortgage amounts that are being lent to consumers particularly with the upper income levels.
So there is some positive news although we think the upside is going to be very much long term and unfortunately in this short period the SA consumers are still feeling the pinch of increasing prices, increasing petrol, increasing electricity and what we’re seeing is, people are borrowing money for their daily needs like food and clothing and everything else, so while there are some positive news unfortunately it’s not overwhelming positive.
What’s also interesting and I’m glad you mentioned the unsecured lending scenario that is somehow slowing down at this point. But the big question is what are people spending unsecured loans on? And you mentioned day to day goods. Is this a very big trend that is playing up, because some would argue that people are taking unsecured loans out to buy a second hand car or to pay for education? Which then means that it is perhaps more a sustainable loan down the line.
Yeah, so we’re seeing two major trends here Eleni: The first trend is a lot more people are borrowing short term, very short term unsecured loans which is six months or less, that’s one extreme.
And the second trend is; People are borrowing much longer term even eight to ten years all for unsecured lending. For the very short term, people are going to pay their loans; people are going to banks and other credit providers. And essentially debt is an indication that they are borrowing much more for day to day needs. What’s happening in the longer term is, there is some people borrowing money for the needs that you mentioned. But I think the overwhelming is actually borrowing it for the very short term to basically be able to meet their day to day needs.
What’s also interesting is what banks are doing and some would argue that banks are looking more towards unsecured lending because they can charge a bigger interest rate which means they make more money off that relative to likes of mortgages, but that said mortgage loans have also started to increase quite dramatically.
Are you expecting some kind of reversal down the line?
I think what we see is that there is a silver lining on the news, what we also see is that retailers have scaled back in terms of granting credit, which is probably going to haunt them in the very short term, but in the long term it’s probably healthier. So we do expect some more healthy activity that’s coming further down the line, like we said we think it’s going to be fairly long term, and for the next few years we don’t anticipate significant changes in the market place.
Benay, I would assume that the repo rate is so low and overall interest rates are quite low, relative to historical levels, are you advising consumers to take the opportunity to pay down debt as opposed to accumulating more debt? Is that what we should be doing right now?
Absolutely. What we always tell people when they come to Debtbusters is, sit down tonight with your family, look at your budget, most people as never done that, look at your personal finances, understand what you paying your money for, and then see whether you are borrowing more money to pay money you previously borrowed, or whether you borrowing money for home improvements or cars or whatever, things that you building equity on. So we always advise people to always check the current condition before going out and buying for more debt. So paying down debt would definitely be one of those.
Well Benay, thank you very much for joining us this evening, good to have you on ENCA. Benay Sager, Debtbusters C.O.O joining us this evening.