Financial pressure drives South Africans to rely on credit
South Africans are increasingly relying on credit to make ends meet, with defaults on payments rising.
A recent report has made note of a concerning trend in South Africa, where households are increasingly turning to credit to make ends meet, rather than relying on their salaries. Despite a healthier outlook for salaries, the National Financial Ombud Scheme South Africa (NFO) is warning about a growing debt crisis, with defaults on payments rising.
The report from TransUnion found that credit products commonly used by low- and middle-income South Africans are seeing rapid increases in both uptake and default rates.
According to BusinessTech, non-bank personal loans have the highest serious delinquency rate in this country, with 41.3% of account holders at least three months behind on payments. This is a significant increase from the previous year and highlights the greater risk associated with credit offered outside traditional banking institutions.
The NFO's Banking and Credit Division deals with disputes involving non-bank credit products, and Manager of Adjudication, Kwanda Vabaza, notes that reckless lending is a persistent problem.
"We're seeing cases where credit was granted to consumers who clearly could not afford the repayments," he said.
The NFO offers free, impartial dispute resolution services to protect and empower credit-active South Africans. Vabaza encourages consumers to stay vigilant and adopt good credit habits, such as only borrowing what they can afford to repay and avoiding using credit for day-to-day expenses.
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