South Africans owe R1.9 trillion

WORSENING: GOVT PASSES ON RISING BORROWING COSTS TO CONSUMERS

More than R260 billion of this is personal debt for credit cards, retail accounts and payday loans.

Sinking feeling spreads as more residents become submerged in debt to pay for necessities.

South African consumers reportedly owe a total of R1.9 trillion – more than R260 billion of which was unsecured credit for retail accounts, personal and payday loans and credit cards.

According to the National Credit Regulator’s latest credit report, about R959 billion of this massive debt bill is for loans.

Herman Lombard, founder and executive director of financial service provider African Unity, said the debt crisis showed the need for financial literacy and cautioned that consumers should avoid falling into the debt trap.

Lombard said people, especially the youth, should learn to work on debt responsibly.

“There are different kinds of debt. There’s the good, the bad, and yes, really, the ugly. It is vital consumers know the difference.”

He said good debt came in the form of loans that allowed consumers to accumulate value, such as to buy property, improve homes, study or run a small business.

“Home renovations add value to your property, so it’s a good investment. A student loan allows you to get an education and increase your long-term earning potential, while a small business loan can help you set up or expand your business.”

Bad debt, however, was incurred by acquiring consumable items with a short lifespan, such as clothing and retail accounts, dining out, expensive holidays and vehicles, which immediately decrease in value upon purchase.

Most credit card transactions are considered bad debt, since