Survey reveals debt distress and payment holiday take-up

A dipstick survey by personal finance website JustMoney has revealed that a third of their readers would be in severe financial distress if they were not offered payment holidays, and a similar number would experience financial distress when their payment holidays comes to an end.

Payment holidays, when you take a short break from your repayments on a credit agreement such as a loan or bond, have been one of the lifelines that lenders have offered customers who might be floundering in the wake of the Covid-19 pandemic.

Close to 1 400 JustMoney readers answered six survey questions in June.

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1.  50 per cent are not considering taking a payment holiday.

2. 69 per cent were not offered a payment holiday by their banks or creditors.

3. More than 60 per cent were not taking a payment holiday for any of their accounts.

4. 27 per cent said their payment holiday was three months and more.

5. 33 per cent would be in severe financial distress if they were not offered payment holidays.

6. 36 per cent would experience financial distress if their payment holiday came to an end.

Relief plans

Examining the feedback in more detail, JustMoney commercial manager Sarah Nicholson said that close to 50 per cent of participants said they were not considering taking a payment holiday for the accounts they have with their credit providers.

Besides this, 22 per cent said they were definitely considering the relief plan, while 17 per cent of readers said they were not sure.

When asked whether they were offered a payment holiday by any of their creditors, 69 per cent said no, and 31 per cent confirmed that they were indeed offered a payment holiday.

Regarding the number of accounts they were going to take a payment holiday for, more than 60 per cent said they were not taking one for any of their accounts, while just over 18 per cent said they would apply for only one account.

Around 12 per cent of readers said they were going to need a payment holiday for two of their accounts, while close to five per cent said they were taking a payment holiday for three accounts.

Close to two per cent said they were taking for four accounts, and another two per cent said they were taking for five and more accounts.

When asked how long the payment holidays were that they had been offered, about eight per cent of readers said this was for one month, nearly eight per cent said it was for two months, and 27 per cent said it was for three months.

Financial stress

“Our readers were also asked to rate the severity of their financial stress on a scale from one to five if they were not offered a payment holiday, with one meaning “limited” and five meaning “severe”.

“Approximately 16 per cent of readers rated one, six per cent rated two and 33 per cent rated five,” said Nicholson.

“We also asked our readers whether they were concerned that they’ll experience financial distress again when their current payment holiday ends. To this question, 36 per cent said they’ll definitely experience financial distress and 28 per cent of readers said no.”

Nicholson said the survey confirmed the pressure that many South Africans are experiencing, but also showed that many are doing their best to maintain payments.