This is according to FNB’s analysis of money management behaviour of its Retail banking customers who earn between R7 000 and R60 000 per month.
FNB said its data paints a picture of households that are heavily reliant on unsecured debt to get through each month. Raj Makanjee, FNB Retail Chief Executive said, "Consumers who have not defaulted on a credit repayment in the last 18 months show better money management practices in general. These consumers are typically saving more compared to those who are in arrears and hold more secured credit, such as a home loan or vehicle finance as opposed to unsecured credit".
Christoph Nieuwoudt, FNB Consumer Chief Executive added that, "In contrast, the reliance on debt is higher among consumers who have defaulted on three or more credit obligations in the last 18 months, with nearly 80 percent of monthly interest paid going towards servicing unsecured credit. Consumers are also taking on expensive forms of credit, from multiple providers and potentially at maximum interest rates".
There is no getting away from this step, to get out of the debt cycle, you must cut back and get rid of unnecessary credit. There are a couple of ways to approach this; the first option is to pay-off smaller debts/loans first. Once these are paid off, you can redirect these payments towards bigger credit obligations. Alternatively, you can prioritise paying-off debt with the highest interest rate first. This will also help to save on interest over the long-term.