How multiple loan agreements impact home loan applications for South African consumers

An average local consumer has several loan agreements to their name. 

This includes everything from vehicle purchases to personal loans and credit cards used to pay deposits or manage day-to-day expenses, says Bongani Gwexe, the supervisor industry analyst for Statistics at the National Credit Regulator (NCR).

Average credit granted

Responding to a media enquiry by "Independent Media Property", the NCR says for short-term personal loans, the average credit granted is around R2 000, with payday loans being the most common type.

The government agency, which regulates the credit industry, says the smallest short-term loan granted is R1 000, while the largest reaches up to R8 000.

“When it comes to unsecured personal credit loans, the lowest average granted is R8 600, and it can go up to R87 000.00”

Moving on to credit cards, the NCR says the total average amount granted is approximately R19 000. “Vehicle loans, on the other hand, show a significant average of R390 000.00. Additionally, the data on total mortgage agreements indicates an average of about R1.4 million.” 

Debt levels across income bands 

The debt levels vary significantly across income bands, but what debt councillors consistently see among consumers who approached them was that debt is rarely isolated-it is layered, says René Moonsamy, the chairperson of the National Debt Counselling Association (NDCA). 

The organisation which represents some debt counsellors operating in South Africa says that in the lower-income band, the average consumer tends to carry heavy unsecured debt.

It says this includes payday or short-term loans, retail store accounts for clothing and furniture, and revolving credit facilities. “These debts often accumulate quickly because they are used to cover discretionary spending and living expenses,” says Moonsamy. 

The NDCA says in the middle-income band, they see credit cards, personal term loans (typically repaid over two to four years) and vehicle financing. These consumers often use credit to supplement income shortfalls or manage rising household costs, it says. 

In the higher income bands, the NDCA says mortgage bonds, vehicle finance, credit cards, and structured loans are more common. “While asset-backed debt can be productive, it still places considerable pressure on monthly affordability.”

Highest and lowest debt levels

The lowest debt levels can fall below R15,000 in total outstanding debt, while the highest can exceed several million rand, particularly when home loans and multiple facilities are involved, says Moonsamy.

The Chairperson says what remains consistent across all bands is that debt becomes problematic when instalments consume too much of monthly income. 

Home loan applications prospects

To assess the home loan applicant’s eligibility for the level of finance applied for, the banks are required, in terms of the National Credit Act, to assess the applicant’s creditworthiness and ability to afford to repay the new home loan instalment, says Kay Geldenhuys, head of Sales Fulfillment at ooba Home Loans.

The banks scrutinise the applicant’s current credit rating at the credit bureau, and should the credit rating be unfavourable due to irregular or non-payment of existing contractual debt, the home loan application will be rejected, says Geldenhuys.

“Should the applicant’s credit rating at the bureau be satisfactory, the banks will assess the level of indebtedness to determine affordability for the new home loan amount applied for.”

"The home finance services provider says the affordability assessment is a review of contractual debt repayments and monthly household expenses against the applicant’s net monthly income to ensure that the applicant has sufficient disposable income to cover the repayment of the monthly instalment on the home loan applied for without falling into financial distress. “

"Applicants who are over-indebted will therefore not qualify for a home loan.” 

What does unsecured debt mean

The NDCA says the prevalence of unsecured debt shows that many South Africans are using credit to fund everyday necessities- furniture, clothing, school costs and basic household items. It says this reflects constrained disposable income rather than reckless consumption.

“Credit cards and term loans often indicate short-term cashflow pressure, driven by rising insurance premiums, medical aid contributions, electricity tariffs, fuel prices and general inflation. In essence, households are trying to maintain stability in an increasingly expensive environment.” 

The debt counsellor representative organisation says the solution is twofold.

“Firstly, improved financial planning, careful rebudgeting and building even modest emergency savings buffers where possible. Debt is expensive, and using it as a long-term substitute for income is unsustainable.

“Secondly, where affordability has already been compromised, debt restructuring may become necessary. Early intervention is critical. The longer someone delays action, the more interest compounds and the greater the financial and emotional strain becomes.” 

Mortgages make up the largest credit share at over R1 trillion 

According to the NCR’s Consumer Credit Market Report (Q2 June 2025), total outstanding consumer debt in South Africa now stands at approximately R2.44 trillion.

Mortgages make up the largest share at around R1.27 trillion (52%), followed by secured credit such as vehicle finance at R541 billion (22%), credit facilities (credit cards and store accounts) at R349 billion (14%), and unsecured credit at R210 billion (8.6%).

Credit demand

In the most recent quarter alone, consumers submitted 18.5 million credit applications, of which 67% were declined, says Leonie van Pletzen, CEO of the Credit Association of South Africa (CASA).

“However, the ‘average’ South African’s debt profile differs significantly by income band. Lower-income households tend to carry smaller unsecured loans and credit facilities, often between R1 000 and R8 000. Higher-income earners typically carry long-term secured debt such as mortgages and vehicle finance, which substantially increases their overall exposure.” 

The organisation, which calls itself the home of credit providers in South Africa, says the key takeaway is that demand for credit remains extremely high, but access to formal credit is tightening.

CASA says South Africa’s credit market is diverse and segmented with mortgages and home loans, vehicle and other secured finance, credit cards and store accounts (credit facilities), unsecured personal loans, short-term microfinance loans and developmental credit. 

It says credit facilities account for nearly 70% of all credit accounts nationally, indicating heavy reliance on revolving credit.

Reasons for taking credit are developmental

Among lower-income households, unsecured and short-term credit plays a more significant role. CASA’s demand-side research found that over 40% of declined borrowers were seeking loans for developmental purposes such as education, small business activity or housing improvements, says Van Pletzen. 

“However, when those applications are declined — and with rejection rates sitting at 67%-many turn to informal markets. Because these transactions are not reported to credit bureaus or regulators, the scale of informal borrowing is not fully reflected in official statistics.” 

Existing debt key for bond approval 

Existing debt is an important factor in bond approval, as lenders assess affordability using debt-to-income ratios, repayment history, credit scores and overall exposure, says CASA. “This is a necessary and responsible part of protecting both consumers and the financial system.

“Importantly, not all debt is viewed negatively. Well-managed credit, including unsecured or short-term loans, can actually help build a positive credit profile. Consumers who consistently meet their repayment obligations demonstrate financial discipline, which strengthens their credit record over time.”

According to CASA, for many South Africans, smaller regulated loans are consumers' first step into the formal credit market. “When these loans are structured responsibly and repaid on time, they create a track record that can support future access to larger, long-term finance such as a home loan.” 

Independent Media Property