20-million South Africans have 51-million loans to borrow R2.5-trillion on credit

Nearly 20-million South Africans currently hold about 51-million loans, with total outstanding balances standing at R2.5-trillion.

The latest Credit Stress report says this is a 3.2% year-on-year increase.

The report, compiled by consumer insights firm Eighty20, also revealed credit card growth is up nearly 6% and retail credit balances rose almost 4%.

Overdue balances have hit R200bn, representing 8% of total debt, a rise of R11.5bn in the past year.

The report highlighted different age groups, their credit behaviour and how credit evolves at different life stages.

According to the report, South Africa's shifting demographics are set to influence various sectors, including the credit industry.

“Credit is becoming increasingly concentrated, with loan balances growing at a 5% compound annual growth rate (CAGR) since 2021, while the number of credit-active individuals has increased by only 1.4%.

“Home loan balances are growing over 50 times faster than the number of home loan holders,” the report found.

Credit holdings vary significantly across age groups, reflecting differing financial priorities and access to credit.

60% of the population younger than 35 years old hold only 17% of all outstanding credit by value, mostly in the form of unsecured debt — retail, personal loan and credit card.

People get into vehicle asset financing early (in their mid-20s,) but home loans rapidly take on a larger percentage of their debt load as they move into their 30s.

Young professionals, often unable to afford property in their preferred neighbourhoods and needing transport for career growth, typically enter vehicle asset financing at an early age.

The report shows by age 30, around 12% of the credit-active population holds vehicle asset financing, with this percentage remaining stable until their 60s.

In contrast, home loan holdings reach 12% of credit-active individuals in their mid-30s, grow rapidly through their 50s, and decline after retirement around age 65.

Three quarters of those earning more than R60,000 per month have vehicle asset financing (VAF), whereas only 60% of those people have a home loan.

As people age, the distribution and size of their credit holdings also change.

There are very low outstanding balances for those younger than 25 as well as those older than 65 (5% of credit by value).

From age 25, VAF becomes an increasingly large part of the credit basket, with home loans following thereafter.

Maintaining a good credit history is key to being able to use credit wisely to acquire wealth, storing assets like houses, or buying assets like vehicles that enable you to make a living

—  Andrew Fulton, Eighty20 director

The report also shows that for all credit, there is a steep rise in credit acquisition that tops out between the ages of 35 and 45 — which hold two-fifths of all credit.

Life events significantly impact credit holdings, with milestones such as moving out, starting tertiary education, landing a first job, getting married, and having children all driving credit needs.

By retirement, people often downsize their vehicles and homes as their children move out.

For the credit-active population, over 80% of those under 25 hold retail credit, typically their first credit product.

According to the report unsecured debt becomes dominant after 25, with over 32% of 26-year-olds holding it.

By 30, 12% have VAF, though this never exceeds 13% across age groups.

Credit card ownership surpasses 40% when borrowers are in their 50s, where home loans peak around 20% penetration.

While home loans and VAF decrease post-retirement, credit card, unsecured and retail credit remain prevalent throughout life.

Rising living costs and inadequate retirement savings have led some retirees to maintain or even increase credit exposure, especially through credit cards.

“As we have seen, life stage and age have a large impact on credit holdings and the amount of debt people are carrying,” said Andrew Fulton, Eighty20 director.

“Credit scores are also impacted by age, and there is a direct correlation with a higher (better) credit score and age. 

“This is both a function of your credit holdings, time in the credit market and your payment behaviour. Maintaining a good credit history is key to being able to use credit wisely to acquire wealth, storing assets like houses, or buying assets like vehicles that enable you to make a living. 

“Sadly, too many South Africans ruin their credit scores at a young age by defaulting on unsecured or retail loans, probably not understanding (or not caring about) the long-term consequences. 40% of all defaulters are people under the age of 35. However, with 38% of overdue balances sitting with Gen X (45-60-year-olds) maybe it isn’t only age,” said Fulton.