File picture: Denis Farrell, AP

Johannesburg - As July has been earmarked National Savings Month, attention is turning again to debt, and how South Africans can trim this in an increasingly tricky environment.

According to the World Bank, South Africans are the world’s biggest borrowers, as 86 percent of South Africans are in debt.

The World Bank report, Global Findex database, notes 86 percent of South Africans took out a loan in 2013/14 - the latest available data - compared to a global average of 40 percent. And almost a third of South Africans would not be able to raise funds in a crisis in the next month.

This seems to jell with figures from the National Credit Regulator, from the fourth quarter of last year, which shows that R125.15 in new credit was granted in the quarter, a 0.17 percent increase.

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However, credit applications dropped to 11.85 million, a decline of 529 000, and 52.05 percent of applications are rejected.

Credit bureaus held records for 23.74 million credit-active consumers, an increase of 1.3 percent when compared to the 23.45 million in the previous quarter. Consumers classified in good standing increased by 343 000, to 13.87 million consumers.

In addition, the NCR says, the number of accounts increased from 80.60 million in the previous quarter to 83.55 million. The number of impaired accounts decreased from 20.24 million to 19.99 million when compared to the previous quarter, a decrease of 245 000 quarter-on-quarter and 2.29 million year-on-year.

According to IMB Financial Services, South African are drowning in debt and this is only getting worse, with 120 percent growth in over-indebted consumers between 2013 and 2015.

Glen Jordan, Director of IMB Financial Services, says before South Africans focus on savings, they first need to get out of debt.

Read also: Saving and investing: what’s the difference?

He explains that an over-indebted consumer cannot pay all their financial obligations timeously, as agreed in a credit agreement, and this figure is growing - from 5 million in 2013 to 11 million last year.


However, there are ways of getting out of debt, Jordan says. His tips include:

1.Budget – To solve your debt crisis, you need to understand your financial affairs and see where it is possible to scale back on spending. Create a written plan, detailing which debt you will tackle first and see if you have any savings that you can rather use to pay off debt. A budget is essential to make sure that you are spending less than you earn.

2.Start paying off debt with the highest interest first – Pay off the balance with the highest interest rate first such as credit card debt and store cards.

3. Ask your creditors for help – negotiate a lower interest rate, speak to your creditor and explain your situation if you have a previously good credit history they may be willing to write off the interest.

4. Seek advice from a professional– A professional will explain all of your options and let you choose the option that makes the most sense for you in your situation.

5. Use savings to pay off debt – Using cash reserves to pay off debt is a smart decision as you pay a far higher interest on debt than you receive from the bank on your savings.

6. Sell items for cash – Use the proceeds to reduce your debt.

7. Make more money – Look for ways to increase your income e.g. rent out a room in your house or take on a part-time job.

8. Change your habits – Your daily habits are the reason you got into debt in the first place now it’s time to scale back by going for a walk rather than have a gym membership, pack lunch rather than buying it, stock up on groceries especially when there are specials on.