South Africa's consumer credit growth amid rising personal loan delinquencies

South Africa’s consumer credit landscape experienced significant growth in several key sectors during the first quarter of 2025, according to TransUnion’s Q1 2025 South Africa Industry Insights Report.

However, this expansion was accompanied by a concerning rise in delinquencies, particularly within non-bank personal loans.

 Surge in Credit Card Uptake Driven by Riskier Borrower Segments

According to TransUnion, credit card originations soared by 30.7% year-on-year (YoY), the highest among all consumer credit products. Notably, a greater share of below-prime consumers entered the credit space, with originations in this risk bracket rising by 33.1% YoY. Together, subprime and near-prime borrowers made up 69.3% of new credit card accounts, up from 64.3% the previous year.

In an effort to mitigate the associated risk, lenders capped average credit limits on new cards, which fell 13.1% YoY.

Despite these changes, consumer interest remains high. According to TransUnion’s Q1 2024 Consumer Pulse Survey, a third of respondents plan to apply for a new credit card in the coming year.

Average account balances also rose by 7.1% YoY, while delinquencies decreased slightly, down 20 basis points to 12.3%.

 “While inflation has dropped to the low end of the South African Reserve Bank’s target range during Q1 at close to 3%, South Africans are still experiencing financial pressures from prior price increases, turning to credit to help them make ends meet,” says Ayesha Hatea, director of research and consulting at TransUnion.

 “Despite these strains, consumers have increasingly prioritised keeping their credit cards in good standing, as they likely want to ensure access to the ongoing liquidity that this credit product provides," she says.

Vehicle Finance Picks Up Pace, Driven by Gen Z

TransUnion says vehicle finance originations increased 11.6% YoY, with average loan values rising by 3.0%. The standout growth came from Gen Z, particularly those aged 26 to 29, where originations jumped by 28.5% YoY.

This age group now makes up a growing portion of vehicle finance recipients, marking an important opportunity for lenders as these consumers hit financial milestones such as career growth and household establishment, it says.

While Gen X remained stable, other generations recorded a dip in vehicle loan activity, placing older Gen Z consumers in the spotlight for future growth, according to TransUnion.

The SARB’s back-to-back repo rate cuts—0.25% in January and again in May—have further supported this upswing. TransUnion’s data shows that 22% of South Africans plan to secure vehicle finance in the next 12 months.

“With vehicle ownership being a priority due to limited public transport offerings, buying a vehicle is often a first step into secured credit for young professionals,” says Hatea. “Vehicle finance often requires relatively small deposits and flexible financing options can be negotiated to make monthly repayments more affordable. Borrowers don’t need as extensive a credit history to purchase a vehicle as they do to buy a home. Successfully managing a vehicle loan demonstrates financial responsibility, which can strengthen future home loan applications.”

Personal Loan Demand Persists Despite Repayment Challenges

Both bank and non-bank personal loans saw growth in Q1 2025, up 2.7% and 13.6% YoY, respectively. Still, mounting pressure on consumers’ wallets has seen delinquencies among non-bank personal loans spike to 41.3%—the highest since Q2 2021.

Of those delinquent borrowers, 83.9% fall into the below-prime category. The delinquency rate for non-bank loans was also 15 percentage points above that of bank-issued personal loans, which reported a slightly more favourable risk profile.

“South Africans are increasingly turning to low-value personal loans with shorter repayment terms to manage their monthly expenses. However, persistently high delinquency rates — particularly among non-bank personal loans — indicate that many consumers are under significant financial pressure and struggling to meet their loan commitments,” says Hatea. “As lenders respond to growing demand for this type of credit, it’s essential they align their growth strategies with prudent risk management to ensure long-term sustainability.”

Home Loans Continue to Lag

Home loan originations declined by 10.8% YoY during Q1, marking the only consumer credit category in negative territory. The decline was most pronounced among prime and above-prime borrowers, where originations dropped by 21.1% YoY.

This ongoing decline follows a trend dating back to Q1 2020, barring a brief uptick between Q1 2022 and Q1 2023.

“The fact that even prime consumers are pulling back from the housing market is a clear signal that affordability remains a significant barrier,” says Hatea. “This trend has implications not only for the credit market but also for broader economic activity tied to home ownership and property development.”

As activity in the housing market continues to dwindle, financial institutions may need to innovate, rethinking products, pricing, and outreach, to appeal to younger buyers and stimulate demand in what has traditionally been a cornerstone of secured lending.

PERSONAL FINANCE