Economic devastation sees rapid rise in debt counselling

With the economic devastation wrought by Covid-19, and the joblessness that has resulted, financial constraints and the possibility of falling into debt are a grim reality.

Debt counselling is a viable solution in these circumstances, giving people the chance to navigate their way out of debt. A recent survey conducted by leading debt counselling company DebtBusters indicates that consumers are increasingly turning to this solution.

READ MORE: 10 Questions you should ask your debt counsellor

An increase in inquiries

Benay Sager, head of DebtBusters, states, “Debt counselling inquiries are definitely growing, as more consumers are seeking help with their debt.”

This information is reflected in DebtBusters’ Debt Index for the second quarter of 2021. Sager explains, “In Q2 2021, there was increased demand from consumers for debt counselling, with inquiries up 18% compared to the same period last year.”

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Why the increase?

The repercussions of nationwide lockdowns, and consumers’ inability to borrow money are the critical factors driving this trend, Sager says.

He notes further, “It is clear that the debt situation of SA consumers has further deteriorated recently. In the absence of a meaningful increase in real income growth, SA consumers continue to supplement their income with more unsecured credit.”

“Average loan size has increased, and the number of debt obligations, or open accounts, has decreased. These findings indicate that consumers are seeking help.”

Is there positive news?

DebtBusters’ Debt Index tracks client trends quarter-on-quarter. In the Q2 2021 Index, Sager notes, “The number of clients completing debt counselling successfully has increased sevenfold over the last five years.”

“Consumers who successfully completed debt counselling in Q2 2021 paid back R320m worth of debt to their creditors as part of the debt counselling process.”

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