Consumer debt in SA has become a pressing issue as more households turn to loans to survive the rising cost of living. While inflation has eased somewhat, its long-term impact has steadily eroded incomes, forcing consumers to rely on expensive credit options. This situation highlights the urgent need for improved financial literacy and credit education among South Africans.
According to the Q2 2025 Debt Index, a striking 95% of people applying for debt review held personal loans, while more than half had payday loans. These short-term loans have become lifelines for many, yet with annual interest rates often exceeding 23%, they come at a steep cost. The National Credit Regulator has expressed concern over this trend, emphasising the importance of understanding the terms outlined in the National Credit Act.
Inflation’s bite is still being felt
Although headline inflation has slowed, it continues to be driven by unavoidable, regulated expenses. Electricity tariffs are now more than 2.6 times higher than in 2016, petrol has risen by 75% in the same period, and municipal rates in major metros are climbing by double digits annually.
“The cumulative impact of inflation is stark,” notes Benay Sager, Executive Head of DebtBusters. “Compared to 2016, nominal incomes have increased only 2%, but the real purchasing power of salaries has fallen by nearly half, significantly reducing disposable income for many households.”
Interest rate cuts and retirement funds bring only temporary relief
Recent interest rate reductions, along with access to retirement savings via the two-pot system, have provided some breathing space for households. More than 2.2 million South Africans have already drawn funds through this system. In addition, some government employees have turned to debt consolidation loans to ease monthly obligations.
Yet, the sustainability of these measures is uncertain. As Sager cautions, “The average interest rate for unsecured debt remains around 23% per annum. While lower than before, it is not sustainable to service such loans over several years.”
Debt ratios paint a worrying picture
The numbers highlight how precarious the situation has become. The median debt-to-annual-income ratio has climbed back to 112%, after showing signs of decline during most of 2024. Even more concerning, the share of income needed to service debt has jumped to 70%, the highest level since 2017. These figures are raising red flags at credit bureaus, potentially impacting individuals’ credit scores.
For higher earners, the picture is even starker. People taking home R20,000 or more spend up to 138% of their annual income on debt, while those earning R35,000 or more face a staggering 185% debt-to-income ratio.
Unsecured debt levels among top earners unsustainable
Unsecured debt is also rising sharply, especially among top earners. Compared with 2016, unsecured debt has risen 33% on average, but for those earning R35,000 or more, it is nearly 80% higher than nine years ago.
“This is simply unsustainable,” says Sager. “High-income earners are shouldering record levels of unsecured debt, and with so much of their income going towards servicing it, the pressure is immense.”
Consumer debt in SA: a glimmer of hope through debt counselling
Despite the grim statistics, there are signs of positive change. Debt counselling is proving to be a lifeline for many financially stressed households. The number of South Africans completing debt review has increased twelvefold since 2016. In Q2 2025 alone, consumers who completed the process repaid more than R770 million to creditors.
Sager highlights the wider benefits: “If this repaid money is recycled into further lending, it could significantly support job creation and economic growth in South Africa.”
Additionally, the rise in consumers taking proactive measures is encouraging. Online self-help tools such as the Debt Radar and Debt Sustainability Indicator are gaining traction, with the subscriber base surpassing one million and growing steadily. These tools are crucial for effective debt management and addressing over-indebtedness.
Balancing relief with responsibility
The state of consumer debt in SA shows that while short-term relief measures like rate cuts and access to retirement funds offer some breathing room, they cannot substitute for long-term solutions. South Africans continue to face mounting pressures, and unless the cost of living stabilises, reliance on expensive loans will remain entrenched.
For now, the growing number of consumers turning to structured debt solutions is a hopeful sign. It suggests a shift towards more sustainable ways of managing financial pressure, an essential step in navigating South Africa’s complex economic landscape. However, to truly address the debt crisis and build financial resilience, a comprehensive approach involving improved financial literacy, responsible lending practices, and supportive government policies is necessary.
