Access to personal loans on the rise and people borrowing at a high

21 January 2014 - Which Way To Pay

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Unsecured personal loans are risky for those in debt

With access to easy personal loans on the rise and more people borrowing at an all time high, financial advisers warn that households are overburdened with debt. They are urging consumers to save money to avoid “festive season hangovers”. According to the latest Finscope 2013 survey, nearly 20% of unsecured personal loans taken by consumers were for household bills, monthly fees or unexpected personal expenses.

Nearly a quarter of South Africans were experiencing financial difficulties

Debtbusters chief executive Ian Wason said the first signs of over-indebtedness were already showing. To date, they had received 80 percent more debt counselling applications compared with the same period last year. The unsustainable increase in payday loans was one of the factors that aggravated indebtedness, eroded spending power, he said “Something drastic and urgent needs to be done to protect South African consumers and to reduce the risk of over-indebtedness,” said Watson. “Historically, a spike in personal loan defaults precipitates a spike in non-performing loans and other lending products.”

Women over the age of 30 with formal credit are more likely to be over-indebted

”People with formal credit are more likely to have taken credit from other places, including friends and family, colleagues, employers, retail stores, mashonisas and stokvel or burial societies.” They normally had several reasons for borrowing which included bills, clothes, education and home improvements. According to the study, formal savings had declined slightly and 58 percent of adults claimed they were currently not saving.

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