New unsecured lending dynamic further muddies borrowing waters

As more South Africans begin to feel the financial pinch, unsecured lending values have also increased and a growing number of borrowers are still struggling to repay their debts, says the South African arm of leading global information services company, Experian.

The majority of South African consumers are gearing up for even tougher times going forward as food, power, transport and fuel prices are increasing. The petrol price has increased by 81c a litre and electricity will increase by 8% in the next three years.

Experian South Africa MD Michelle Beetar says, whereas in the past the traditional unsecured lending market had been dominated by low-income earners taking on relatively small amounts of debt, recent months had witnessed larger unsecured loans being taken on by more middle-income group borrowers.

"This new dynamic illustrates the increasing financial strain being experienced by the middle-income groups as well, many of whom are resorting to unsecured finance to meet the inability of their income to cover their living costs," she says.

Beetar urges consumers to budget sensibly and trim all non-essential spending during these tough times.

"Learning how to effectively manage your credit commitments is key to financial stability. And, given the current inflationary pressures caused by the weak rand and the nationwide strikes, the problem is likely to worsen rather than improve - at least for the foreseeable future."

Beetar encourages consumers to take advantage of the free annual service provided by the credit bureaus as prescribed by the National Credit Act, giving consumers the right to access their credit reports once a year at no cost.

"Our online credit monitoring and identity fraud protection service, CreditExpert, allows consumers to check their credit reports to ensure it accurately reflects their financial position," she said.

The service is available online and call centre agents are invariably on hand, agents who are trained to assist consumers to better understand their reports and advise them on possible courses of action for remedying any uncertain or negative information.