Unsecured lending surges to new high

Almost half of South Africans with access to credit are not in good standing.

The number of consumers with impaired records increased by 95000 to 9.34million, the National Credit Regulator revealed yesterday.

Even after banks had said that they will keep a closer eye on the increase in unsecured lending, this category of credit spiked by nearly 12% in the three months to December.

Unsecured loans carry a higher interest rate than secured loans used to finance assets like a vehicle or a house.

More than R29-billion worth of unsecured loans was extended in the last quarter.

Unsecured credit also grew as a share of total credit extended and now accounts for more than 24% of all credit.

After economists, and later the Treasury, voiced concerns over the rapid growth in unsecured lending, banks like Capitec moved to reassure them that the loans were not targeted at the poor.

Capitec said most of its unsecured loans we re to existing clients who earned more than R15000 a month.

According to the regulator, the number of applications for credit received increased by 1.4million from 10.38million in September to 11.81million in December, an increase of 13.80% over the fourth quarter and 21.56% higher than a year earlier.

With the prime interest rate at historical lows since July, consumers were expected to use the opportunity to pay off debt. But the regulator's credit bureau monitor shows little evidence of such behaviour.

Although the percentage of credit-active consumers with impaired records decreased to 46.8%, about 14% of consumers had judgments and administration orders against them.

A fifth of credit-active consumers are three months or more in arrears and about 13% have adverse listings.