The average personal loan amount in South Africa right now – and how much people owe in their clothing accounts
New data from TransUnion shows the average loan amount in South Africa – how much money people are borrowing from various banks for personal use during the current Covid-19 pandemic.
The results are included in the credit bureau’s latest South African Industry Insights Report (IIR) for the first quarter of 2021.
According to TransUnion, the granting of personal loans by banks continues to decline; however, balances increased significantly, mainly due to an increase in both new loan amounts and an increase in the average balance per account.
The pace of recovery in origination growth in personal bank loans has continued to be slow since the pandemic began, it said. The issue volume remained more than a third below the previous year in the last three quarters and in the fourth quarter of 2020 it fell by 34% compared to the previous year.
“The average loan amount increased significantly, 22.1% year over year, suggesting that bank personal lenders continue to be cautious in lending to lower risk borrowers. As a result, the pace of balance growth accelerated significantly in the last quarter, ”the group said.
Average balances increased 20.3% and total credit limits increased significantly by 16.7%, increasing total outstanding balances 12.7% year over year.
In tough economic times, consumers often turn to personal loans as a source of liquidity to pay other bills and fund day-to-day expenses, TransUnion said.
The serious default rate for bank personal loans decreased slightly year-on-year in the first quarter of 2021, marking the fourth quarter in a row with a deterioration. The ongoing deterioration in defaults reflects the impact of the pandemic and, more recently, the end of deferral programs for many borrowers, TransUnion said.
Personal Loan – Non-Bank
Issue growth shows signs of recovery as lenders become more willing to lend to new borrowers, TransUnion said. Defaults deteriorated dramatically for the third straight quarter as non-bank personal loan borrowers continued to find themselves in financial trouble as a result of the pandemic.
While the granting of personal loans to non-banks still fell significantly year-on-year (-17.9%), the decline was less than in the previous quarters (-51.1% year-on-year in the second quarter of 2020 and -24.0% in the third Quarter of 2020).
“Non-bank lenders appear to be more open to new lending than their bank counterparts because of their higher risk appetite,” the group said.
“Personal loans are generally considered consumer loan products, and because these products have no future use, default rates tend to be higher.
“While both bank and non-bank personal loans saw an increase in defaults, it was much more pronounced for unsecured personal loans. This trend is back before Covid-19, but has been exacerbated by the effects of the pandemic. “
Given the typical risk profile of the clients served by this group, an increase in default rates for non-bank personal loans is to be expected. They are often at greater risk and therefore more susceptible to income shocks.
Non-bank lenders have very different business and risk models compared to more traditional banks, and their credit pricing and risk management practices reflect this. “However, it is important that these trends are carefully monitored and complemented by proactive mitigation strategies,” said TransUnion.
Clothing account information
According to TransUnion, apparel account borrowers are deleveraging in light of the ongoing financial burden. In light of tense consumer finances and a sustained rise in defaults, lenders remain cautious about issuing new loans.
The total number of apparel accounts was down 10.7% year over year in the first quarter of 2021, marking the third straight month that accounts have declined.
“Apparel account borrowers appear to have reduced leverage as balances continue to decline, with the first quarter of 2021 being the fourth straight quarter as balances decline – 9.9% year over year.
“The appetite of consumers and lenders for new credit remained subdued, and origination – a measure of the opening of new accounts that depends on both supply and demand – continued to decline,” said TransUnion. The first quarter of 2019 was the last quarter with positive origination growth.
“This cautious approach is likely being driven by the significant increase in the percentage of heavily overdue accounts, which rose 370 basis points from 30.9% in the first quarter of 2020 to 34.5% in the first quarter of 2021,” the credit agency said.
This deteriorating trend in late payments has been going on since early 2019 and has grown in magnitude since the second quarter of 2020, when the effects of the pandemic were most felt. “This suggests that apparel account borrowers are under significant financial burdens and that lenders need a preventive analytical approach to identify and support their customers,” it reads.
Read: Business Talk – In conversation with Dries Zietsman from TransUnion