‘Possible debt spiral faces consumers amid rising interest rates and higher inflation’

Debt Counselling Companies are warning of a possible debt spiral, facing many consumers amid the rising interest rates and higher inflation. Last month alone, debt counselling inquiries went up by 32%.

At the same time, the fourth quarter Debt Index revealed that many consumers continue to supplement their income with unsecured credit.

Today marked the start of National Debt Awareness Month.

Debt Counselling and DebtBusters released its Debt Index report, comparing data gathered over the past five years.

The report looked at the impact and consequences of the pandemic on South African consumers. It found that those consumers who’ve applied for debt counselling in the fourth quarter of last year had 25% less take-home pay. It also found that on average consumers were spending about 62% of their take-home pay to service their debt before applying for debt counselling.

Financial situation of SA consumers slowly getting out hand, Khandani Msibi explains:

Head of DebtBusters Benay Sager says although consumers are feeling the debt pinch, there is hope. He says an increase in debt counselling inquiries mean that many consumers are exploring viable ways to avoid a debt trap.

More interesting is that in the last quarter of last year, just over half of new applicants for debt counselling were male.

Since the beginning of the pandemic, consumers benefited from a low interest rate environment. However, this is expected to change with the increases in interest rate that have so far gone up by half a percentage point since November last year. Even less encouraging is the prospect for economic growth. Forecast to remain weak, with the economy expected to grow by 1.7% this year.

VIDEO: Research shows South African consumers’ debt situation is worsening: Saubrey Tshabalala