South Africa’s middle-income consumers on average spend 25% of their take-home monthly income to pay interest accumulated on debt, said First National Bank on Monday.
It said an analysis of the money management behaviour of its retail banking customers earning between R7,000 and R60,000 per month painted a picture of households heavily reliant on unsecured debt to get through each month.
Consumers who had not defaulted on a credit repayment in the last 18 months showed better money management practices in general and were typically saving more compared to those who were in arrears and held more secured credit, such as a home loan or vehicle finance, as opposed to unsecured credit.
FNB consumer chief executive Christoph Nieuwoudt said: “In contrast, the reliance on debt is higher among consumers who have defaulted on three or more credit obligations in the last 18 months, with nearly 80% of monthly interest paid going towards servicing unsecured credit.
“Consumers are also taking on expensive forms of credit, from multiple providers, and potentially at maximum interest rates.”
– African News Agency