According to credit bureau TransUnion, rising delinquency rates (where borrowers are three or more months in arrears with their payments) in home loans, personal loans and vehicle finance show consumers are struggling to service debts.
“With Eskom electricity tariffs set to increase 9,41 percent, 8,1 percent and 5,2 percent respectively in the next three financial years and the price of petrol set to rise for the fourth consecutive month in May 2019, consumers are finding themselves under increasing pressure to pay the bills – and service their personal debt, including credit cards, home loans and personal and vehicle loans,” the bureau states.
TransUnion’s South Africa Industry Insights Report for Q4 2018 shows that personal loan, home loan and vehicle loan delinquency rates increased by 1,8 percent, 0,4 percent and one percent, respectively over the same period. Only credit card delinquency rates saw a 1,6 percent improvement.
“This suggests consumers are prioritising immediate cash liquidity needs over other credit commitments. The difficult economic climate has contributed to the increases noted in delinquencies, with consumers taking strain in servicing their debt as daily expenses continue to rise while incomes remain stagnant.”
TransUnion states that lenders are also becoming more cautious when it comes to issuing new credit cards and personal loans, as they grow increasingly wary of consumers overreaching to stay afloat. Instead they are focusing on lower risk consumers who have demonstrated good credit behaviour.
“This means that it is becoming harder to get new credit lines. It’s therefore more important than ever for consumers to look at how they manage their current financial commitments before applying for new credit. Checking your free Credit Report and understanding your ability to service your current debt will help you make better financial decisions,” TransUnion advises.