In South Africa, the high cost of living combined with a lack of financial literacy has generously contributed to the debt trap that many consumers find themselves in. While saving does not really feature in the SA personal finances landscape, debt certainly does because South Africans spend three-quarters of their monthly income on repaying it. The weakened Rand also doesn’t help, and to many people who are simply trying to survive, personal loans and unsecured debt seem like the only way to go. Thus creating more debt. But why are so many South Africans in debt?
Here are four of the most common factors that increase the number of South Africans in debt:
Being financially literate means that you understand the confluence of financial, credit and debt management. It also means that you have the knowledge required to make financially responsible decisions – decisions that are fundamental to your everyday life.
Financial literacy impacts the daily decisions an average family makes when trying to balance a budget, buy a home, fund their children’s education and ensure that there is an income after retirement.
When expenses exceed income, households tend to take up loan offers, instead of curbing their spending. This is particularly common among middle-income households, hindering their ability to save money, thus diminishing the potential for medium to long-term wealth creation. At Quick Consolidation Loans, we emphasise on the importance of developing better spending habits in order to avoid overspending.
Unplanned and emergency expenses such as a household repair, a loss in income, or a major medical bill can put a significant financial burden on you and your family. If your emergency savings won’t cover the expense, take a closer look at your other savings. If you have enough money set aside in a savings account, tap into those funds in order to cover emergency expenses that are outside of your budget.
It is a well-known fact that living in South Africa is not as cheap as it used to be, making it difficult for many South Africans to save money. Because of this, many people apply for personal, unsecured loans as a short-term measure, and these loans usually lead consumers straight into the debt trap.
Home loans, student loans and car repayments are acceptable and often unavoidable debts. However, consumers need to be mindful of what they can actually afford, as each person’s situation is unique.
If you are one of the many South Africans who are in debt, contact Quick Consolidation Loans for a consolidation loan, today.