It’s likely that the South African Reserve Bank will cut interest rates by up to 50 basis points over the next 12 months. This would result in consumers with lots of debt saving considerably on their debt repayments. This, however, should not encourage consumers to go out and start spending more and using more debt. Here’s how the “relief” would affect you.
Consumers Feeling The Pressure
2019 has been a tough one for South African consumers. High inflation, rising fuel costs, increases in taxes and levies have made living costs higher than ever before. Many consumers have started to rely on more debt to make ends meet.
Latest stats show that around 40% of credit-active consumers are in arrears on their accounts. This is a staggering amount and shows us how heavily over-indebted the general population is.
When Will Things Get Better?
This temporary relief shouldn’t be reason to celebrate. It is a marginal savings that probably will go unnoticed by most. Consumers should not use this as a reason to go and take out more debt. Rather use these savings to supplement increasing grocery or transport costs.
Consumers need to hang in there and take their monthly budgets seriously. It is important to keep on the lookout for opportunities to cut down and save where possible. Making use of more debt adds to your monthly expenses in the form of interest payments and fees.
It’s unclear when price pressure on consumers will ease off, so consumers need to get used to the increased living costs.
What Is In Your Control?
To a certain extent, your debt repayments are in your control. By making additional payments or clearing store cards, credit cards or overdrafts, you can reduce your debt repayments. By reducing your debt repayments, you effectively free up more cash in your budget. This gives you more disposable income.
You can also reduce your monthly debt repayments through debt consolidation solutions. There are two main forms of debt consolidation. These are a debt consolidation loan and a process called debt counselling.
Speak to an expert to find our more about these options and to explore what you qualify for. Taking control of your debt can offer you much needed relief and peace of mind.