More South Africans than ever are relying on personal and short-term loans to cope with rising living costs, despite an uptick in consumer confidence and some financial relief from the newly introduced two-pot retirement system.
According to DebtBusters’ Q1 2025 Debt Index, a staggering 91% of consumers who applied for debt counselling during the first quarter had a personal loan—an all-time high. In addition, 37% reported taking out one-month or payday loans to stay afloat.
“It’s clear that while consumers may feel a little more positive, personal loans, especially one-month loans, remain a lifeline for many, because income has not kept pace with rising expenses,” says Benay Sager, executive head of DebtBusters.
The data shows that South Africans are spending increasingly large portions of their income on debt repayments. On average, debt counselling applicants now use 69% of their take-home pay to service debt—the highest level recorded since 2017.
Lower-income earners (those taking home R5,000 or less) are using 76% of their income to repay debt. Surprisingly, top earners (earning R35,000 or more) are in an even worse position, using 77% of their income for debt repayment—also a record high since DebtBusters began tracking the data in 2016.
Alarming Trends Over Time
DebtBusters’ report compares today’s financial landscape with data from 2016, revealing troubling long-term trends:
Purchasing power has dropped 53% since 2016, despite inflation stabilising in recent quarters. While top earners have seen an 11% nominal income increase, most South Africans now earn 1% less than they did nine years ago.
Essential costs consume a quarter of disposable income for most income groups, with water, electricity, transport, and municipal rates eating into already tight budgets. Many consumers have had to let go of insurance and assurance products just to afford groceries.
Unsecured debt among top earners has soared by 90%, contributing to unsustainable debt-to-income ratios. On average, unsecured debt has risen by 34% across all income levels since 2016.
A Quiet Call for Help
Despite the worsening financial picture, Sager noted that debt counselling enquiries were “muted” in Q1 2025. He attributes this to macroeconomic uncertainty, increased access to retirement funds, and negative perceptions surrounding debt counselling.
However, Sager maintains that debt counselling remains one of the most effective tools for South Africans facing financial distress. While the average interest rate on unsecured debt stands at 25.3%, those under debt counselling can have it reduced to around 2.5%, allowing for faster repayment.
He also pointed to the growing success of online tools like DebtBusters’ Debt Radar and Debt Sustainability Indicator, which now have over 1 million subscribers. Interest in online debt management solutions increased 6% year-on-year in the first quarter.
Positive Signs Amid Crisis
There is some good news: the number of people successfully completing debt counselling has increased 11-fold since 2016. In Q1 2025 alone, consumers who received their debt clearance certificates repaid over R700 million to creditors.
As more South Africans struggle to balance debt with day-to-day expenses, Sager reiterated that structured debt management is still the most sustainable path forward.
“Debt counselling is still the best way to help consumers restructure their debt. While the average interest rate for unsecured debt has come down from an eight-year high to 25.3%, under debt counselling, it can be reduced to ~2.5% per annum, allowing consumers to repay expensive debt faster. Vehicle debt and balloon payments can also be paid over a meaningful period by getting the average financed vehicle interest rate of 14.9% a year negotiated down to a more manageable level,” Sager concluded.
