South Africans are the biggest borrowers in the world

There are more South Africans in debt from loans than with jobs.

This is the latest findings of the World Bank, whose report stated that South Africa’s total credit card and store card debt is R18 billion, reports Zululand Observer.

The shocking statistics reveal that 73% of all disposable income is spent on servicing debt, 39% of consumers have at least one account overdue, only 6% save for retirement, 58% of people struggle to meet monthly repayments, and the average debt per person in South Africa is R70,000.

ALSO READ: SA middle-income consumers spend 25% of income on debt interest – FNB

Such debt leads to a bad credit rating which in turn, given these statistics, leads to the decline of 70% of all credit applications.

Should a badly indebted person’s credit application be approved, they would be subject to a higher rate of interest, which means the overall loan repayment would be much more than the actual loan amount.

Experts at Kudough Financial Rehab say this inclination towards going into debt, fuelled by high unemployment and a historically lax credit lending industry, have eroded not only the personal financial capacity of millions of South Africans, but also negatively affects physical and mental health.

While some people crumble at the thought of being a few hundred rands in debt, others feel quite content even when staring down the barrel of debts running into the hundreds of thousands of rands.

With South African monthly salaries effectively one-third of salaries for the same job in first world countries such as the UK, most South Africans have no choice but to go into debt for everyday items such as cell phones and vehicles.

But, with a bad credit rating through not servicing existing debts, applications for cell phone contracts, vehicle finance, insurance policies, and home loans or rental applications are more likely to be declined.

There are also instances where a consumer’s credit report is incorrect. This means the consumer may be branded with a poor credit rating in error.

The experts encourage all South Africans to pull a credit check with not only one, but all four leading credit bureaus in the country.

These include TransUnion, Compuscan, XDS, and Experian.

“It is important to compare your reports from all leading bureaus as some credit providers or banks can list data with one bureau and not another, and you could end up being oblivious to what is on and what is not on your record,” Kudough said.

“An estimated 87% of South Africans have errors on their credit reports.

“Last year, 17% of people who pulled their credit reports and found errors on them challenged the wrong information, and two-thirds were resolved in favour of the consumer.”

Kudough also said that regularly checking a credit rating could furthermore prevent the consumer from becoming a victim of identity theft.

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