Credit facilities - the most popular debt in South Africa

Consumer appetite for credit facilities has increased according to the Credit Market Report (CCMR) published by the National Credit Regulator (NCR) in April.

The report showed that there were approximately 2 million agreements entered into (see the infographic) in the 4th quarter of 2017. Short-term unsecured loans came in the second place with more than 1 million agreements.

According to Bongani Gwexe, an industry analyst from NCR, credit facilities have become popular because they are easily accessible to consumers.

“Smaller loans like credit facilities, unsecured and short-term unsecured products are taken by more people due to their small size and accessibility,” says Gwexe.

What is a credit facility?

A credit facility is an agreement between the bank and a consumer that allows a consumer to access money whenever they want to.

As stated in the National Credit Act, a credit provider agrees to supply goods or services or to pay an amount determined by the consumer from time to time This amount is paid to the consumer or on behalf of, or at the direction of the consumer.

According to Capitec Bank, the money will always be available in your account for a certain period. After that you must renew the contract. As with any credit application, you must produce the required documents to allow the bank to assess if you qualify. Whatever you use must be paid back in full – with interest – every month.

Unlike loans, with a credit facility you only pay interest on the money you used, not on the total amount of money that the credit provider has made available to you.

Credit facilities include garage cards, credit cards, overdrafts and store cards.

In the report, store cards dominated the number of agreements by a whopping 1,7 million while credit and garage cards received R7.13 billion of the total rand value of credit facilities granted.