After the tenth consecutive interest rate increase last month took the banks’ prime lending rate to 11.75%, borrowers are looking at increased debt repayments. From car loans to home loans, personal loans and credit cards, debt repayments have been steadily climbing since the SA Reserve Bank (SARB) started the current interest rate hiking cycle in November 2021. 

While the SARB typically increases interest rates in an effort to curb spending and reduce inflation, inflation is currently at 6.8%, having inched down 0.2% in April. This is the lowest inflation since May last year when it was 6.5%. Unfortunately, economic experts are predicting that we have not yet seen the last interest rate hike so consumers can expect more pain in the months ahead. 

Debt counselling firm DebtBusters reports that in the first quarter of the year, there was a 92% increase in the number of people signing up for its debt management tools. ““As interest rates have risen, credit has become burdensome for many consumers. Average bond interest rates increased from 8.3% to 11.4% per annum in a short space of time. Average vehicle finance rates rose from 12% to 14.8% during the same period. This means if you have a R1-million bond and owe R200 000 in vehicle finance, you are expected to pay nearly R5 000 more per month. This steep increase is pushing consumers to tap into more personal loans. Nearly everyone who applied for debt counselling (in the first quarter) had a personal loan. This indicates consumers are supplementing their income using unsecured credit and personal loans have become a lifeline for many South Africans,” says Benay Sager, head of DebtBusters. 

1. Cut the grudge expense without losing cover  

Reducing the amount you spend is not pleasant regardless of your income category and most consumers turn to their grudge purchases first – insurance. In the case of short-term insurance, it’s a payment for an event which may or may not happen, while life insurance tends to pay out after you die which makes it more important for your beneficiaries than yourself. 

However, the reality is that if you are in a financial bind, cutting your insurance is the last thing you should be doing. Weigh up the cost of the monthly premium against the cost you would be liable for if you had an accident and had no insurance in place. The good news is that you can save on your insurance without necessarily compromising your cover. 

The quickest way to do this is by using an aggregator site like Hippo, where you can input your details once and receive comparison quotes from up to 10 different insurers. When you get comparative quotes, remember to check that you are comparing apples with apples. Variables you should look at include the excess you are liable to pay when you claim and rental car options in the event of an accident. 

2. Put in the research to reap the savings

Taking the concept a little further, investing a little time in research before you do your grocery shopping could save you hundreds of rands on a monthly basis. The fact that large retailers such as Pick ‘n Pay, Shoprite and Woolworths all have apps means that it is easy for you to input different items and immediately see where they are on special offer at the cheapest price. 

3. Driving down your fuel costs  

The cost of fuel has shot up over the last three years. Although motorists are expecting a welcome drop in petrol and fuel prices this month (7 June), the reality is that fuel will still cost more than R20 a litre. Just as comparing insurance quotes will save rands, planning your car trips so that you make fewer trips can reduce your petrol costs. Other ways to improve your fuel consumption so that you can save money include setting your cruise control at a reasonable speed, switching off the air-conditioning and removing items such as roof racks to reduce drag on the car. DM