Consumers take one-month loans to supplement income – report

South African consumers are continuing to supplement their income by taking out personal and one-month loans to help them make ends meet.

The Debt Index report for the first quarter of the year from debt counselling company DebtBusters has found that a new record of 91% of consumers had personal loans.

A further 37% have one-month loans, also known as payday loans. 

This indicates that loans have become a lifeline for many, says DebtBusters executive head Benay Sager.

“While consumers’ financial confidence may have improved in 2024, some trends have not,” the report states.

“Income growth is still [lagging] behind expense growth: since 2016, electricity tariffs increased by 135%, the petrol price increased by 88% and inflation’s compounded impact is 52%.

“As a result, it is perhaps not surprising that consumers who applied for debt counselling in Q1 2025 needed 69% of their take-home pay to service their debt expenses, [and] 91% of these consumers had a personal loan – a new record.

“A further 37% of consumers had a one-month [payday] loan – indicating that consumers continue to supplement their income with short-term unsecured credit, and personal loans, especially one-month loans, have become a lifeline for many,” the report states.

The report found that new online debt management subscriptions had gone up by 6% compared to the same period a year ago.

“Debt repayments make up a sizeable portion of take-home pay. But what do the rest of the consumers’ budgets look like? Predictably, there are differences between income groups, particularly in food and housing expenditure,” the report notes.

“However, surprisingly, almost all consumers spend 13% of their disposable income on transport, 10% on utilities, and 4% on cellphone charges.

“Those taking home less than R5,000 per month are having to cut back on housing costs to accommodate higher electricity prices and high food inflation. Those taking home between R5,000 to R10,000 per month are having to cut back on food to accommodate higher rent, in addition to higher electricity and transport prices.

“Those taking home between R10,000 and R20,000 per month, the backbone of SA’s working population, are under severe housing pressure, and have had to cut back on food expenditure as well as spending on their children.

“Those taking home between R20,000 and R35,000 per month appear to have been able to balance their expenses, with the percentage allocated to expenses holding steady. This does imply that they would have had to change what they spend money on to keep the budget balancing.”

The report found that, compared to 2016, the average take-home pay of incoming debt counselling clients decreased by 1% while inflation went up by 52%.

“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,” says DebtBusters’ Sager.

“Today’s consumers have 53% less purchasing power [than in 2016]. Though the effect of inflation has recently subsided, average nominal incomes of incoming cohorts are now 1% lower than 2016 levels, and cumulative inflation over the nine years is 52%. There’s better news for those taking home R35,000 or more. For them, nominal income has increased by 11% since 2016 – the first significant growth for some time.

“Consumers in most income bands spend 25% of their disposable income, after debt repayments, to pay for water, electricity, rates and transport. Food inflation has meant many have had to sacrifice insurance and assurance cover.”

Sager says that people in lower-income groups have experienced 2% to 4% more inflation over the past few years as they spend a larger portion of their income on food.

“Top earners have unsustainable levels of unsecured debt. On average, unsecured debt levels are 34% higher than nine years ago, but for people taking home R35,000 or more, it has increased by 90% – the highest ever.”

Sager says debt counselling enquiries this year were a bit muted compared to previous years.

“This can be attributed to uncertainty about the macroeconomic environment, access to retirement funds and some negative marketing against debt counselling. Debt counselling is still the best way to help consumers restructure their debt.

“While the average interest rate for unsecured debt has come down from an eight-year high to 25.3%, under debt counselling, it can be reduced to 2.5% per annum, allowing consumers to repay expensive debt faster.

“Vehicle debt and balloon payments can also be paid over a period by getting the average financed vehicle interest rate of 14.9% a year negotiated down to a more manageable level,” Sager says.

Sager gives tips on how consumers can manage their money and avoid having to turn to personal loans.

Know what costs are involved when it comes to personal loans: Personal loans come at a very expensive price tag. Often we see the average interest rate for a personal loan is somewhere between 22% to 25%, so if you are going for a personal loan, one needs to bear in mind that the total amount you’re going to have to pay back over a two or three year period will be significantly more than what you borrowed.

If you are considering a loan, always compare loans from multiple providers if you can, before you sign on the dotted line. Understand what is included in the cost. Sometimes credit insurance is included, but sometimes not. It’s also important to understand the monthly fees involved and any other charges built into the cost of the loan.

Build an emergency fund: Our guidance would be to try to build an emergency fund for yourself. Start with putting away R500 per month if you can, and over 6 months you’ll have built about R3,000, which you can keep adding to. Often it doesn’t need to be a really large amount: somewhere between R3,000 to R10,000 is what our guidance would be with regards to having an emergency fund that you can tap into, if and when you need it.

This is for smaller unexpected expenses like when your car tyre bursts, or when you need to have your geyser attended to and you may not have the necessary insurance.

Generally, what we find is that people use personal loans, particularly small personal loans, in cases of emergency that they haven’t catered for. So one of the best tips is to build your emergency fund over time, and it doesn’t have to be really big.

Have the right insurance in place: Have the necessary insurance for things that may go wrong. These days, there are really good insurance products, including event-based and short-term insurance products. For example, you can get your car covered for one day, or if you’re going to be participating in an event you can cover your belongings for the day, or for the week, or just for the event.

Make sure you put insurance in place in case something goes wrong, because often we find people need to borrow money to cover shortfalls that they hadn’t budgeted for, which happened as a result of not having the right insurance.

Take advantage of cash-back programmes: Participate in the cash-back programmes that retailers offer. Maximise those as much as possible, to reduce the need to rely on personal loans if you run short of money at the end of the month, or even in the middle of the month.

Most of the programmes are free because retailers want your loyalty and your data, so if you’re happy to share information about yourself and receive marketing material from the retailers, you can enjoy some benefits and price reductions. 

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