South Africans’ DEBT levels are at an all-time HIGH
Inflation and interest rate hikes have pushed South Africans’ debt levels sky high. Here’s how bad the debt-to-income ratio really is.
As we already explored in our story on the danger of personal loans, the aforementioned has become a lifeline to calm many South Africans’ debt levels, even for high-income individuals.
SOUTH AFRICANS’ DEBT LEVELS
Diving into the DebtBusters data, in Q2 of 2023, debt counselling inquiries went up by 43%. Online debt management increased by 99% versus the same period last year. The head of DebtBusters, Benay Sager, says as interest rates have increased, so has lending activity.
“The average loan size has increased by 78% since 2016, and virtually all consumers (95%) who applied for debt counselling in Q2 2023 had a personal loan – both indicating that consumers continue to supplement their income with unsecured credit, and personal loans have become a lifeline for many,” Sager added.
DebtBuster’s figures show that South Africans are dedicating roughly two-thirds, or 66%, of their income to service their debt. This is the highest that ratio has ever been. Interestingly, the seriousness of South Africans’ debt levels is across the board, from low- to high-income individuals.
For reference, your debt-to-income (DTI) ratio is how much money you earn versus what you spend each month. Experts recommend you keep your DTI ratio below 43%. According to DebtBusters, the total debt to annual net income ratio is now 121% in South Africa. That’s off the scale.
LESS ABLE TO PURCHASE
Also noted in the DebtBusters findings is weakening purchasing power due to South Africans’ debt levels. Incomes have only increased by 1% in the last six years, yet inflation has grown 39%. What this means is you’re effectively taking home 38% less today than you did in 2016.
Scary stuff. Are you and your household suffering from this rampant inflation and lack of buying power? What actions have you taken to reduce household costs? Feel free to share with our audience in the comments section below.