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Debt dependency a huge SA problem: 4 red flags you should look for

Published Jul 26, 2022

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South Africans are struggling to fight the ongoing battle of debt addiction – a problem that has worsened over the past decade, states Sebastien Alexanderson, founder and debt counsellor at National Debt Advisors.

The current economic turbulence has had knock-on effects on the consumer including rising petrol prices and inflationary pressures leading to over-indebtedness, a huge threat to the financial well-being of South Africans.

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Statistics released by Veri Cred Credit Bureau (VCCB) showed that 717 495 people were under debt review, while the average South African is spending up to 75% of their disposable income on debt repayments.

Alexanderson said that the Household Debt to Income ratio in SA currently stands at 67, and any ratio above 43% is considered too high and a sign of indebtedness.

“Although more consumers are becoming aware of the benefits of debt review, South Africans need to be encouraged to find ways to live within their means – the inability to do so is at the heart of the problem,” Alexanderson said.

Here are four signs that could indicate addiction to debt within households:

1. When household spending is more than 30% or 50% of their gross monthly income on total borrowing repayments.

2. When your household is in arrears for more than two months on a credit commitment or household bill

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3. Having four or more credit commitments

4. When spending on total borrowing repayments takes the consumer below the poverty line

Alexanderson shares tips on how consumers can break the debt trap:

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Avoid using credit

A major sign that your debt situation is spiralling out of control is when you start taking on more debt on a monthly basis, just to make it through the month. Instead, take a hard look at your living expenses and try be frugal.

Buy what you can afford, don’t borrow:

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Creditors might tempt you into more debt by offering you very attractive credit products. Don’t fall into more debt by taking on a new credit product.

Start saving:

The importance of putting money away into an emergency fund for unplanned expenses cannot be emphasised enough. When people don’t have a savings plan for emergencies they often take on more debt.

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