Over 11.1 million consumers in South Africa have more debt than they can afford and in many instances, consumers pay two thirds of their monthly income towards servicing their debts. More and more people in South Africa are in need of immediate debt help. The rising living costs, taxation and the overall economic slowdown in the country are contributing factors.

Over half the consumers that are over-indebted fall in the age group of between 30 and 46. Home loans make up a large portion of the debt problem, with over 56 percent of consumers struggling with debt also having difficulty in paying their mortgages. Credit card debt is also a major problem, with just under 59 percent of over-indebted consumers struggling to pay debts on their credit cards.

Unfortunately, ignorance regarding investments and savings contribute to the debt problem, with consumers not paying enough attention to bank fees and interest gained on savings. Indeed, over a third of over-indebted consumers with bank accounts are ignorant regarding interest rates on their savings, while just over a fifth of the consumers needing debt help don’t know the rate payable on bank fees. With less than a fourth of South African consumers still having money by the end of the month, it becomes clear that the debt spiral is taking its toll.

Ignorance also plays a role in the debt management problem, as many of the consumers do not know what their rights are regarding expired debt. An awareness drive is needed to help consumers become informed. Many creditors still collect on the prescribed expired debt because of the ongoing ignorance. The situation is so dire that over 50 percent of credit-active people in the country have poor credit histories.

Lack of savings is yet another contributing factor. South Africa has been noted as one of the countries with the lowest rate of savings, worldwide. Low income, high living costs and growing debt are among the reasons, in addition to the tax rate, low confidence in the South African economy and safety of the financial institutions, as well as high inflation. Even in countries where the people earn far less than in South Africa, the people are able to save part of their income.

Unfortunately, consumers now borrow more and save less, with only a quarter of the working people under the age of 30 making provision for their retirement and less than a third keeping money aside for emergencies.

Consumers should take note that debt help is available in the form of:

  • Debt counselling
  • Debt consolidation
  • Debt review
  • Sequestration
  • Administration
  • Debt management assistance

One of the proven methods for becoming completely debt free within a relatively short period is that of sequestration. Although there are costs involved and the consumer should have enough assets to ensure benefit to the creditors, once sequestrated, the consumer is able to rebuild their financial life. With sequestration, the creditors cannot harass the consumer once the application has been lodged, and the high interest rates normally associated with debt repayment agreements don’t apply. We recommend getting debt help today to break the debt cycle.