Debt counselling enquiries rise as financial stress mounts

Debt counselling firm DebtBusters has released its Debt Index for the third quarter, which shows that there has been an increase of more than 30% in debt counselling enquiries compared with a year ago, indicating far higher levels of financial stress among consumers.

The firm says that with no meaningful increase in real income, the combination of rising interest rates and inflation is choking South African consumers, who are borrowing more.

Many of the enquiries are from consumers who took on debt to buy assets such a motor vehicles when interest rates were at historical lows last year.

“The impact of the twin ‘I’s – inflation and interest – is evident in the data, which shows consumers are using unsecured credit to supplement their income. Average loan sizes have increased by 43% in just six years,” says Benay Sager, head of DebtBusters.

At the same time the number of debt obligations has decreased from 7.6 to 6.1 per consumer. This indicates more debt per credit agreement and that people are sooner reaching the stage where they are seeking assistance.

DebtBusters first began collating and analysing data for the Debt Index in 2016. A comparison with the third quarter of 2016 starkly shows how inflation has eroded income and how rising interest rates are adding to debt-service costs.

Consumers who applied for debt counselling in Q3 2022 had:

• 33% less purchasing power:

• A higher debt-service burden:

• Unsustainably high levels of unsecured debt:

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