Record numbers of South Africans rely on personal loans to make ends meet
DebtBusters
According to a report by DebtBusters, 91% of consumers who applied for debt counselling in the first quarter had a personal loan, which was a new record.
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AN ANALYSIS report from DebtBusters, a debt counselling and consolidation company, has revealed a sharp increase in people turning to personal loans to cope with rising living costs, with a record number of people using personal and one-month loans to supplement their income.
Benay Sager, executive head of DebtBusters, said personal loans were a lifeline because people’s income had not kept pace with the rising cost of living, including steep electricity and petrol price hikes.
“The report showed that despite the impact of inflation recently subsiding, consumers who applied for debt counselling in the first quarter of 2025 had 53% less purchasing power than in 2016. They were spending around 25% of their disposable income on water, electricity, rates and transport. On average, they needed 69% of their take-home pay to service debt, with the ratio rising to a record 77% for those earning R35 000 or more.
“Although consumer confidence has improved and the rollout of the ‘two-pot’ retirement system has provided some financial relief, more South Africans than ever are using personal loans to make up the shortfall between income and the rising cost of living,” he said.
The report indicated that 91% of consumers who applied for debt counselling in the first quarter had a personal loan, which was a new record. A further 37% had a one-month loan, also known as a payday loan.
“Over the past nine years, electricity tariffs have increased by 135%, the price of petrol has risen by 88%, and the compound effect of inflation is 52%. As a result, consumers who applied for debt counselling in the first quarter of 2025, on average, needed 69% of their take-home pay to service debt. This is a significant increase compared to previous quarters and the highest since 2017.
“The most vulnerable consumers, taking home R5 000 or less per month, use 76% of their income to repay debt. Those earning R35 000 or more spend 77% servicing debt. The ratios for these income groups are the highest since DebtBusters started analysing the data in 2016,” Sager added.
According to the report, compared to 2016, today’s consumers have 53% less purchasing power.
“Consumers in most income bands spend 25% of their disposable income, after debt repayments, to pay for water, electricity, rates and transport. Food inflation has meant many have had to sacrifice insurance and assurance cover. For people in lower-income groups, who spend a larger portion of their income on food, food inflation has meant that they have experienced 2% to 4% more inflation over the past few years.
“The number of consumers who completed debt counselling has increased 11-fold since 2016. Consumers who received their clearance certificates in the first quarter of 2025 paid back over R700 million to their creditors,” he added.
Sager said that interest in online debt management was up by 6% compared to the same period over a year ago, with subscriptions for DebtBusters’ online proprietary tools, Debt Radar and the Debt Sustainability Indicator, now exceeding one million.