Many South African consumers are counting the sleeps until the first pay day in 2019. December pay day feels like a lifetime ago and many have run out of money in the past few weeks. Debts, school fees, holidays, dinners and other festivities have eaten up all disposable income and have forced many to take out debt to fill the void.
Consumers rush to take out new personal and payday loans and apply for new credit cards at this time of the year. Most will take anything to get by regardless of the cost and their current financial situation. According to data from FNB’s retail segment, 56% of middle-income consumers use up their entire income in 5 days or less.
More than 50% of consumers miss at least one debit order over a 12-month period. This is according to Christoph Nieuwoudt, chief executive officer of FNB Consumer.
“This indicates consumers are under pressure. For almost 40% of such customers, debt repayments make up more than half of their take-home-pay, which we consider to be very high.
“The main driver of this is the large number of microlender loans and store cards that consumers take up.
“The ideal scenario for a consumer is to have one provider who gives them a transactional account and the right type of credit when needed,” said Nieuwoudt.
Aim To Save
Consumers that have too much debt need to look for solutions such as debt consolidation or debt counselling to help them manage their large repayments. Once the debt is under control and a good budget is in place, consumers need to focus on savings. Saving up for retirement or even a rainy day are important goals to have.
By having a savings pot, consumers can use cash for big unforeseen expenses. This would prevent them from having to use expensive debt. Short-term, unsecured debts such as personal loans and credit cards are the main drivers that cause consumers to become over-indebted.