Debt burden threatens households as consumers enter 2026 on fragile footing

South African consumers are heading into 2026 carrying a heavy debt load, prompting renewed warnings from debt and credit experts that households need to make careful financial decisions to avoid sinking deeper into financial distress.

Neil Roets, CEO of Debt Rescue, said the organisation is increasingly concerned about the level of debt consumers are bringing into the new year. While January is traditionally a financially demanding month, he said the pressure in 2026 is far more severe.

“Households are starting the year already weighed down by accumulated debt, back-to-school costs, and essential living expenses that continue to rise faster than incomes can stretch,” Roets said.

“Even with some welcome relief in fuel prices, many consumers are still living on extremely narrow margins, where one unforeseen cost can derail an already fragile budget.”

Roets said Debt Rescue sees the impact of this strain daily, with many families devoting a large portion of their income to servicing debt, leaving little room for essentials or savings. As a result, consumers often turn to short-term credit or personal loans simply to cope.

“It’s a situation that has become increasingly unsustainable for millions of households,” he said.

According to Roets, the first step toward escaping the debt trap is awareness and structure. He urged consumers to draw up honest and detailed budgets that account for every source of income and expense.

“Laying out every income and expense, identifying where money leaks occur, and determining where habits can be adjusted. A budget is not meant to punish; it is meant to empower South Africans to regain control of their finances,” he said.

Roets added that when income can no longer cover both basic living costs and debt repayments, it is a clear sign of over-indebtedness. In such cases, he said, regulated debt restructuring can provide much-needed relief and breathing space.

Meanwhile, Jaco van Jaarsveldt, chief strategy and innovation officer at Experian, said South Africa’s credit data offers a misleading sense of optimism.

Experian’s latest Consumer Default Index shows a 14% year-on-year improvement in default rates, but he cautioned that this reflects stricter lending practices rather than improved consumer finances.

“However, this seemingly positive statistic is a deceptive illusion, stemming more from tightened lending practices than from a genuine surge in consumer financial strength,” he said.

“As the echoes of festive spending fade, 2026 is poised to expose a hidden vulnerability, making this a critical moment to confront our credit choices head-on and build resilience for the real financial pressures set to emerge.”

Van Jaarsveldt warned that festive-season spending, including Black Friday purchases, often creates delayed financial stress that surfaces in the first half of the year. Historical trends show that temporary dips in default rates are frequently followed by sharp increases in the first and second quarters.

He added that even financially stable households are showing higher credit card limits and increased usage, signalling a growing reliance on credit to cover everyday living expenses.

“Proactive credit control now is crucial to avoid becoming part of this statistic. Concerningly, even financially stable households (FAS Groups 1, 2, and 3) show higher credit card limits and usage, suggesting reliance on credit for living expenses,” he said.

“The temptation to use these stretched limits for promotional purchases is immense, creating a risky situation. A disciplined budget and prioritising high-interest debt repayment are crucial for preventing unmanageable debt and alleviating financial pressure.”

BUSINESS REPORT