Rising debt stress forces South Africans to turn to pricey loans for survival

THE majority of South African consumers who applied for debt counselling in the three months to June were using personal loans to make the ends meet as the cumulative effect of inflation erodes their income.

- YOGASHEN PILLAY

This is according to the DebtBusters’ Debt Index for the second quarter, which underscored the harsh financial realities faced by South African consumers amidst continued economic pressure.

DebtBusters noted that a staggering 95% of individuals who sought out debt counselling during the quarter had taken out personal loans, while more than half (54%) relied on one-month payday loans.

While these short-term loans have become a critical financial lifeline for struggling households, they carry a steep price, with interest rates often exceeding 23% per annum.

Despite a slight easing of inflation, families continue to grapple with soaring costs of essential services.

“Regulated expenses, such as electricity tariffs and municipal rates, remain the primary drivers of inflation,’ explained DebtBusters.

The data reveals that since 2016, electricity tariffs have skyrocketed, climbing more than two-and-a-half times, while petrol prices surged by 75%. Municipal rates in major metropolitan areas are also escalating each year at double-digit rates, compounding the financial strain on households.