Life may be returning to a semblance of normal as restrictions are eased, but DebtBusters warns that South African consumers would be well advised to avoid falling into pre-lockdown spending habits.
DebtBusters’ quarterly debt index for Q1 2020 showed that average total debt is up 33% compared to the same period in 2016, and Chief Operating Officer Benay Sager says the current economic environment will only make it harder and more expensive to borrow money. He cautions that consumers need to look for ways to cut unnecessary expenses and not to borrow more to make up the shortfall.
Similar insights were revealed in the latest released TransUnion Q1 2020 South Africa Industry Insights Report (IRR) which indicates that the impact of COVID-19 on consumer finances is expected to carry on for a significant period of time. The Q1 2020 IIR figures showed that outstanding balances continued to grow across all major consumer lending categories and was strongest for non-bank personal loans at 17.2% year-on-year.
The study further showed that the greater impact to both households and lenders is the anticipated increase in delinquencies across all categories. As consumers struggle with higher unemployment, or in many cases reduced working hours, the knock-on effect on household finances will start to accelerate into Q3 and beyond.
There has been a sharp increase in the number of consumers going onto payment holiday arrangements in the last few months, and with many of these expected to have expired at the end of June and consumers needing to resume making monthly payments, it is likely that delinquency levels will start to increase as a result.
“As South Africa emerges from the lockdown it is vital that consumers keep a careful eye on their income and expenditure and get professional help if they realise that they’re getting into trouble. The earlier someone seeks help the easier it is to develop a plan to negotiate with creditors to help them get out of debt. If they wait too long, those options may not exist,” Sager further advises.
