A growing number of South Africans are relying on personal loans to bridge the gap between their income and the rising cost of living, even as consumer confidence improves and the rollout of the ‘two-pot’ retirement system offers some financial relief.
According to DebtBusters’ Q1 2025 Debt Index, 91% of consumers who applied for debt counselling during the quarter had at least one personal loan—a record high. Additionally, 37% had taken out a one-month or payday loan.
“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,” said Benay Sager, executive head of DebtBusters.
Over the past nine years, the financial pressure on households has intensified. Electricity tariffs have surged by 135%, petrol prices have increased by 88%, and cumulative inflation stands at 52%.
As a result, consumers applying for debt counselling in Q1 2025 now allocate an average of 69% of their take-home pay to debt repayments—the highest level since 2017.
The burden is particularly severe for low- and high-income earners alike. Those earning R5,000 or less per month use 76% of their income to service debt, while earners above R35,000 spend 77%. These figures represent the highest debt-service ratios on record since DebtBusters began tracking this data in 2016.
Compared to 2016, today’s consumers have seen their purchasing power decline by 53%. Despite a recent slowdown in inflation, average nominal incomes for new debt counselling applicants are now 1% lower than in 2016.
Over the same period, cumulative inflation has reached 52%. There is some improvement among higher-income earners: those taking home R35,000 or more have experienced an 11% increase in nominal income since 2016—the first significant growth in years.
Household budgets remain under extreme pressure. Consumers in most income brackets now spend around 25% of their remaining disposable income – after servicing debt – on basic necessities like water, electricity, rates, and transport.
Soaring food prices have forced many to cut back on insurance and assurance cover. For lower-income groups, who spend a greater portion of their income on food, the effective rate of inflation has been 2% to 4% higher than the average in recent years.
Meanwhile, high-income earners are grappling with unsustainable levels of unsecured debt. Although average unsecured debt levels are 34% higher than they were nine years ago, the increase is 90% among those earning R35,000 or more—the highest ever recorded.
Despite growing debt pressures, Sager noted that interest in debt counselling has been “a bit muted” compared to previous years. He attributed this to ongoing uncertainty in the macroeconomic environment, access to retirement savings, and “some negative marketing against debt counselling”.
Encouragingly, more consumers are successfully completing the debt counselling process. Since 2016, the number of people who have exited with clearance certificates has increased elevenfold. In Q1 2025 alone, those completing the programme repaid over R700 million to their creditors.
Interest in online debt management tools is also on the rise. Compared to the same period last year, usage grew by 6%, with subscriptions to DebtBusters’ proprietary tools – Debt Radar and the Debt Sustainability Indicator – now exceeding 1 million users.
