More consumers seek debt counselling as credit crunch bites

More people are opting for debt counselling as they navigate the economic crunch worsened by the pandemic, according to the latest debt index from DebtBusters.

“In Q3 2021, there was increased demand from consumers for debt counselling, with inquiries up 17% compared to the same period last year. Many consumers are seeking help proactively as consumers are feeling the affect of the end of 2020 payment holidays, after-effects of several nationwide lockdowns and diminished ability to borrow.

“It is clear the debt situation of SA consumers has further deteriorated recently. In absence of meaningful increase in real income growth, SA consumers continue to supplement their income with more unsecured credit,” said DebtBusters.

According to the report, average loan sizes have increased by more than 50% in a few years, and the number of debt obligations has decreased by 19% over the same period — both indicating that consumers are seeking help sooner.

“More alarmingly, the debt-to-income ratio for all income bands is higher in Q3 2021 compared to same periods in the past: 116% across all income bands and 145% for those taking home R20k or more.

 “With all this said, there is some positive news for consumers: The number of consumers successfully completing debt counselling successfully has increased by sixfold over the past five years. Consumers who successfully completed debt counselling in Q3 2021 paid back more than R300m worth of debt to their creditors as part of the debt counselling process.

“In Q3 2021, 57% of new applicants were male, indicating that more men are becoming proactive about their debt. In a society where debt is often not spoken about (especially by men), this is a welcome development,” said DebtBusters.

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