Recent research conducted by ThinkMoney revealed fascinating information about the make-up of those South Africans who apply for personal loans to supplement their finances.
Over 50 000 loan applications were analysed and the data included information on the reason people needed the loan, the average amount they needed and whether they were permanently employed or not.
Twenty percent of people applying for loans were using it to pay off existing debt, which is worrying as it indicates the large percentage of South Africans who are caught in the ever deepening debt spiral. Four percent were using the loan to do renovations to their home, which suggests they may have been unable to extend the value of their existing home loan and so had to take out a personal loan in order to do this.
Six percent were taking out the loan in order to buy a vehicle or to repair their vehicle, which shows they may not have qualified for vehicle finance and so had to apply for a personal loan in order to buy a car. And 1.6% of people were using their personal loan to pay off bills, indicating they may have been living beyond their means.
The average loan size that people were applying for was R56 000, although the average amount people are actually granted is closer to R29 000, according to ThinkMoney CEO Gareth Mountain. What was interesting to note was that the average monthly salary of those applying for a loan was R10 000-R15 000 (this is what people stated they earned, but not necessarily what they actually earned, as they may have lied about this on their application forms).
In terms of the types of jobs of those who applied for loans, 97% were in permanent employment, with the rest being self-employed or in a long-term contract. Mountain commented on this: “This backs up our knowledge of the average ThinkMoney user: a permanently employed office worker, with frequent access to a computer.” This is because the entire loan application process occurs online, as do all the other financial comparison services ThinkMoney offers.”
He went on to say: “Although the above findings indicate the average loan application we receive, we also receive frequent loan applications from those who earn more than R200 000 a month. People use personal loans for a number of reasons, ranging from weddings to education to holidays, making it a necessary financial product for many South Africans.”