How these 6 types of debt affect middle-class

Debt management firm, Debt Rescue says that middle class South Africans have been feeling the economic downturn for some time, with petrol and electricity price hikes, along with spiralling food costs leaving many in a debt bind.

The company highlighted a recent in-house survey conducted by Sanlam which showed that 73% of professional middle class South Africans were distressed about their financial well-being.

Neil Roets, CEO of Debt Rescue said the figure was in line with its own statistics as well as those statistics supplied by the National Credit Regulator – 50% of credit-active consumers were three months or more in arrears with their debt repayments.

“We know from personal experience that the majority of them hold at least a matric certificate while a significant percentage hold higher education degrees or diplomas,” Roets said.

The most significant source of financial stress identified by the Sanlam survey were short-term debt obligations (car, credit card and personal loans), not being able to save for the future, not having a nest egg for unanticipated emergencies and paying for school and university fees.

“There is clear evidence that consumers are getting ever deeper into debt. The recent downgrades we had from Fitch and S&P is going to further complicate the financial landscape as will a further downgrade from ratings agency Moody’s.

“If they downgrade us by two notches which is what several economists are predicting, this is going to cause serious ructions and once again middle class consumers are going to have to face the brunt of it,” Roets said.

Debt Rescue recently conducted research on its clients over a period of six months with the aim of establishing the types of debt incurred, the age-group debt exposure and the debt-type ratio.

The ratio of applicants between male and female was 49.4% to 50.6%, Debt Rescue said.

Debt Rescue’s data showed that personal loans as a credit agreement category still outnumbers other types of debt in most age categories, including the 18-20 year olds category as a majority debt type.

This is a shift from previous periods, where store cards was the highest category for 18-20 year olds.

In the age group over 65, credit cards are the highest debt type, which is likely attributed to the fact that those facilities are already in existence for a longer period of time, and therefore are easier to access, the debt management firm said.

There was a slight decline in mortgages in the over 65 age group, it noted.

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