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South Africans Are Advancing Their Payday in Droves

Author: Melissa Cohen
Date: 2016-09-27
Many South Africans are using a payday loan to get by with daily necessities. We look at the stats and provide tips to stay debt-free.
You had a plan to be good, but once again you broke the budget. And now payday is just a little too far away. Well, we’ve got good news. You don’t have to call your mom for help with your cashflow situation. And you definitely don't need to call your boss for a payday advance. 

What is a Payday Loan?

A payday loan is a relatively new lending concept. It’s a short-term loan of between R1 and R8000 with a 30-day repayable term. When you’ve run out of money before the end of the month, this is an option to finance your daily necessities until you get paid again. South Africans have latched onto this model like moths to a flame. In the 25 to 39 age group, payday loans make up 67 percent of active credit agreements. This is the age group where the sharpest increase in the use of this type of short-term loan agreement is being observed. According to Debt Rescue, personal loans already make up the majority of debt types for all ages. Between the second quarter of 2014 and the second quarter of 2015, the extension of short-term loans exploded with a 205 percent growth rate year on year to a figure of R3.9 billion. These staggering figures are from the National Credit Regulator (NCR) Consumer Credit Market Report (CCMR).

Is a Payday Loan a Good Idea?

The CCMR reports that the number of short-term agreements climbed to nearly two million in the same period. A growth rate of 137 percent – indicating a large number of South Africans are relying on this product to get by every month. The report highlights that the fastest-growing category of short-term loans is the R5 000 to R8 000 bracket. Some money experts blame the National Credit Act for what seems like a dire need for such a product. DebtBusters CEO, Ian Wason, had the following to say in a recent interview with MoneyWeb:
"The spike in short-term loans can be directly attributed to the NCA’s delayed implementation of amendments to their affordability rules."
Payday loans, like every good thing in life, can result in debt problems if not managed correctly. The current debt crisis among South Africans is evident in more than 50 percent of credit-active consumers owing the majority of their salary to debt. debt review Considering the problem, a payday loan should be considered an aid to the cure, which is better money- and debt-management.

Guidelines to Payday Loans

The popular payday lender, Wonga – who promises ‘fast little loans’ - describes their aim as: “to help open up cash flow when it’s needed, not to constrain people with long-term credit”. The loan provider, that opened shop in South Africa in 2012, has granted over one million loans to date in South Africa alone. They’re very selective about who they grant loans to. The golden rule of borrowing can be applied here: borrow to invest in the solution, managing your debt, not to aid over-spending. When applying for a payday loan, compare product providers and interest rates. And only approach payday lenders registered with the NCR.

Need help managing your debt? CLICK BELOW and fill in your details to speak to a professional debt counsellor.


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