How prepared are you for a financial crisis? Turns out, should something unexpected happen, most South Africans won’t be able to manage an unexpected emergency of let’s say R10 000. That’s because those that can are either debt free or are making use of consolidation loans, either before or right after the emergency.
A survey revealed that half of the households in South Africa would be able to cover R1 000 in unforeseen expenses, while only a small amount ( a quarter of South Africans) could manage R5 000, with the rest making use of personal loans.
Unfortunately, one-third of South Africans said they could not even borrow enough money to cover the R10 000 in unforeseen costs as they do not qualify for a loan of this size.
After a further breakdown, those households earning from R6 000 to R 19 000 (57% of South Africans) would need to borrow the funds to cover an R10000 shock, while with households who earn between R20 000 to R39 000, the percentage drops to about just under half.
What these numbers suggest, is that there’s an alarming number of employees in South Africa that are just one emergency away from financial hardship and the lower the income, the more pronounced the hardship is likely to be.
Here’s a shocking fact though, women spend less than men in nearly every category of credit card expenditure. Women are also more inclined to pay off their cards when compared to men.
“There is a common misperception that women tend to overspend on credit cards, especially on non-essential items such as retail shopping; however, data shows that their male counterparts’ spending far outweighs woman’s and are less responsible when it comes to paying off their cards.” Said Chris Labuschagne, CEO of FNB Credit Cards.
Truth be told, South Africans are becoming more heavily indebted with interest rates climbing and the weak economy. It’s gotten so bad in Gauteng where the levels of indebtedness have risen across all income groups.
Gauteng is South Africa’s most populous and wealthiest province, but also holds the title of having the most indebted citizens. About 40% of people in Gauteng have some form of debt against their names or households.
With consolidation loans (Debt Consolidation), all your debt is taken from all the different places where you have debt and put into 1 amount. This amount is then put against something of value like your house or your car. The house or car serves as collateral should you not pay every month.
The bright side to consolidation loans is how easy it becomes. You only have 1 amount deducted from your account every month and, because your house or car is set as collateral, you’re also paying less interest. That then means, you actually have a few rands extra in your pocket every month when compared to the time you use to pay so many different debts.
This way you get out of debt quicker with more financial freedom around the corner.