(AP Photo/Martin Meissner, File)
CAPE TOWN –The new year may have started off on a tough note for over-indebted consumers who were not savvy with their spending over the festive season and are likely to take on more credit to get by.

National Credit Regulator (NCR) said consumers would look to borrowing after spending recklessly last year, while job losses and unplanned costs such as medical aid also put pressure on pockets.

NCR spokesperson Didi Sebothoma said consumers struggled last year following the one percentage point rise in the value-added tax (VAT) while runaway fuel hikes also compounded the situation.

Sebothoma, however, said the situation had improved.

“Statistics from the NCR shows that the consumer credit health has slightly improved from 38.9percent to 37.4percent,” Sebothoma said. “This number signifies consumers/accounts that are three or more months in arrears.”

The NCR said consumers classified in good standing increased by 50000 to 15.07million during the third quarter ended in September and 2percent year-on-year.

It said impaired records decreased by 584 500 to 9million.

Benay Sager, chief operating officer at DebtBusters said January was linked with a spike in consumers seeking assistance and solutions to cover their living expenses as they could afford their debt.

“As 2018 was a financially challenging year, with the country going into a technical recession, a VAT and interest rate increase, it seems like for many consumers the recent festive season was the straw that broke the camel’s back and forces them to now seek urgent intervention,” said Sager.

He said DebtBusters’ own statistics showed credit agreements per client remained flat following a substantial increase in the last two quarters.

“This is quite an important trend we are picking up on, consumers in the higher income spectrum need to apply for bigger amounts in personal loans or credit cards to get by financially.”

Sebothoma said consumers should only borrow from registered credit providers. “Consumers should also refuse to pay any upfront payments before they are granted a loan.”