Unsecured lending – could it be the straw that breaks your bank?

20 March 2016

It is no secret that as South Africans we are facing tough times. Because of this many people have become dependent on unsecured debt and more specifically ‘pay day’ type loans to get by. You may be one of many that are ‘sandwiched’ by debt, because you have to support not only yourself and your children, but also your parents. It is important that you understand that you are not alone. There are a number of social and economic factors that are contributing to the financial pressure that you and many other South Africans are feeling.

Hikes in the Repo rate 

Three consecutive hikes in the repo rate in the beginning of a new year (which in itself brings big expenses and annual increases) and at a time where we are still recovering from the December holiday season and Christmas spending was the beginning point for our tough financial times.


An increasing cost of living  

Consumer price index (CPI) figures reveal a 6.2 percent year-on-year increase in consumer prices in January 2016 including higher costs of electricity, food and transport. Recently, Pietermaritzburg Agency for Social Development (Pacsa) noted that between January and February alone, the price of a basket of basic food items increased from R1 797.04 to R1 879.24. The Pacsa report points out that a 25kg bag of the staple food – maize meal – increased by R21 (12%) in that time.

Very few of us are saving for our future 

Statistics released by the Reserve Bank South Africa in July last year indicate that South Africa has one of the worst savings rates in the world. South Africans don’t save for unforeseen expenses and neglect to plan adequately (if at all) for their retirement. This is one of the main reasons for South Africans ending up in financial difficulty and having to support their parents. Too many of us are being knocked financially by an unexpected life event because they have no access to an emergency fund.

Financial education is lacking 

DebtBusters’ has seen an increasing number of people under the age of 25 who are struggling with debt. South African school leavers lack both the means and the foundations for basic financial management. This paves the way to poor money management early on in their lives and they develop bad financial habits later on, such as accruing debt and missing account payments. This inevitably leads to a situation where they are subjected to more borrowing to repay existing debt and to meet day-to-day obligations.

South Africans rely too heavily on credit

Many South African consumers are too dependent on credit – mostly shorter term expensive credit – they don’t seem to be concerned about the costs, they just want the cash, now! This desperation for cash is why so many of us fall into the trap of applying for a pay day loan. Over two million South African’s are relying on ‘pay day’ loans every month (according to the latest Consumer Credit Market Report (CCMR)).

Too few of us have a debt management plan

If you don’t have a budget, have never seen your credit report and have no means for tracking your monthly expenses or managing your cash flow, then you are one of too many South Africans that are heading towards financial disaster. Increases in your debt repayments (because of the repo rate increases) and the cost of living have to be tracked so that you can adjust your spending accordingly. Take control of your personal finances by adopting responsible habits with your money.

If you are struggling with debt, call DebtBusters – we can help you!

Call DebtBusters on 086 999 06 06.