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Consumer finances – Index shows top earners turn to borrowing to supplement income

The quarterly debt index from DebtBusters shows that even before the lockdown South Africans were facing increased financial strain, taking on more debt to supplement incomes that had declined in real terms because of inflation. Benay Sager, DebtBusters’ Chief Operating Officer, says that consumers are getting over-indebted faster and that total debt for top earners increased by 63% compared to Q1 2016 levels.

The index shows that the number of consumers with home and vehicle finance seeking debt counselling has grown substantially. Those taking home R20 000 or more a month had a debt to annual income ratio of 142%, which is unsustainable. “The number of credit accounts consumers have when they apply for debt counselling indicates that consumers are getting over-indebted faster but are also seeking help sooner,” says Sager.

In a similar survey by JustMoney, 7 out of 10 of their readers indicated that they are severely affected by Covid-19. Some of the key insights include:

73% admitted to having their family earnings significantly or very significantly affected by the Coronavirus outbreak.
27% said that they were considering a payment holiday.
77% of participants are worried about their financial situation because of the Coronavirus pandemic.
79% said that they were only able to afford an emergency payment of less than R5,000 and less than 10% could afford an emergency payment of up to R10,000.

Click here to download the summary report of Q1 2020 edition of the Debtometer.

Click here to read more about the JustMoney survey results.

The target market of a financial advisor has been hugely impacted by the COVID-19 pandemic. It is therefore important to stay connected with your client and to provide the necessary advice that fits his or her circumstances.

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