Now is the time to reduce debt

CONSUMERS should use the current low interest rates to reduce their debt.

Last week the Reserve Bank's monetary policy committee (MPC) left the repo rate unchanged at 5.5%, which kept the prime lending rate at 9%

Since December 2010 the MPC has left the repo rate unchanged at a more than 30-year-low level but consumers seem not to use this friendly environment to reduce their debt burdens.

Arrie Rautenbach, head of retail markets at Absa, said: "The bank's decision implies that consumers in debt as well as prospective buyers of vehicles and homes have additional breathing space."

"With the national debt-to-income ratio remaining relatively high at 74.6%, this suggests that consumers may not be taking advantage of the lower interest rates to pay off their debt," he warned.

"Customers applying for vehicle finance should opt for cars that fall within their budgets to allow for insurance and to consider additional cover that mitigates loss," he said.

Rautenbach warned consumers: "The only way to succeed financially over the long haul is to control your spending. The current economic climate should serve as an alarm clock."