More people swim in debt

More people are seeking help with their debt, according to the DebtBusters’ 2021 Q1 Debt Index, which tracks client trends quarter-on-quarter over the past five years. It shows that the number of consumers seeking help to manage their debt soared in the first quarter, with enquiries at DebtBusters increasing by 31%, compared to same time last year.

The sudden increase indicates that consumers are becoming more proactive about their debt and lack of increase in real income, says Benay Sager, head of DebtBusters.

“Although nominal income is 7% higher compared to 2016 levels, cumulative inflation of 24% has shrunk real incomes by 17% in five years.”

This means that many consumers are compelled to borrow to make up the shortfall, making them sinker deeper into debt. According to the Index:

People who apply for debt counselling, with take-home pay of over R20 000 per month, spend over 60% of their monthly net income to pay debt.

Unsecured debt is on average 53% higher than in 2016, increasing by 76% for people with a net income of R20 000 or more as this is the most common way to supplement the decline in their real income.

But there is good news

The good news is that more consumers, particularly men, are actively looking for help, Sager says. “The number of men enquiring about debt counselling has increased from 48% to 56% since 2016. In a society where debt is not readily discussed and many men avoid seeking help, this is encouraging.”

The other good news is that the number of consumers who have successfully completed debt counselling increased by 56% per year since 2016. In January this year alone, consumers with a collective R142 million in debt when they started the process, obtained their clearance certificates.