Johannesburg – South African consumers are facing significant financial pressure amid a perfect storm of rising interest rates and inflation, driven by higher fuel, municipal tariffs, electricity, and insurance costs.
In late May, the SA Reserve Bank’s Monetary Policy Committee (MPC) increased the repo rate by 25 basis points to 7% after three years of rate cuts.
Consequently, commercial banks’ prime lending rate rose to 10.5%.
The MPC said the reasons for the increase were inflation of 4%, above its 3% target, risks associated with the conflict in the Middle East, and concerns that higher costs could become embedded in the economy.
Commenting on the rate hike, National Debt Counselling Association (NDCA) chairperson, René Moonsamy, on Monday, 8 June 2026, said the move increases the financial vulnerability of many consumers.
“Many households were already struggling to balance the rising cost of living and debt repayments,” Moonsamy said.
“For people with variable-rate debt such as home loans, vehicle finance and personal loans, a cycle of rising interest rates, as the Reserve Bank tries to curb inflation, could be the proverbial straw that breaks the camel’s back.”
She said that for these consumers, debt counselling has been proven as one of the most effective ways to restructure their debt and repay what they owe responsibly while protecting their assets.
Debt counsellors can negotiate reductions in interest rates for unsecured debt, such as personal loans, if and when needed to repay the debt in a reasonable amount of time.
These reductions provide substantial financial relief, freeing up income to pay off debt, regain financial equilibrium, and ultimately build some financial reserves.
Despite this, Moonsamy said misconceptions about debt counselling persist, making the estimated three million South Africans who could benefit from this intervention reluctant to seek assistance.
She says the four most common of these misconceptions are:
Debt counselling is a sign of financial failure
Fear of stigma or embarrassment that they cannot responsibly manage their finances is why some people avoid debt counselling. In fact, the opposite is true.
When faced with mounting financial pressure and potentially the risk of having a home or car repossessed, debt counselling is a reasonable step to take.
It allows people to honour their obligations in a structured, affordable way. Moonsamy says people in debt counselling have done the responsible thing by choosing to pay their debt instead of running away from it.
You lose control of your finances
Consumers remain involved throughout the process.
The debt counsellor will conduct a confidential assessment to determine whether debt counselling is an appropriate solution and the amount the applicant can realistically repay each month.
They then negotiate with creditors and develop an affordable repayment plan. People are entitled to support and advice throughout the process, and all NDCA members have service teams to provide this.
It is impossible to obtain credit again
Debt counselling could last between three and five years.
The length of time depends on the amount of debt that has to be repaid, what the debt counsellor can negotiate with creditors and what the applicant can afford to pay monthly towards their debt. Consumers cannot apply for new credit during debt counselling.
When they complete the process and receive a clearance certificate, the debt counselling status is removed from their credit profile in accordance with the National Credit Act.
Many emerge from the process in a stronger financial position because they have addressed unsustainable debt levels, established healthier financial habits, and can rebuild their credit profiles, giving them access to more financial products at better interest rates.
Debt counselling is only for people who have no or low income
For debt counselling to work, a consumer has to be shown to be over-indebted or likely to become over-indebted and has to have a source of income to repay the debt.
Most consumers who use debt counselling successfully are middle- and upper-income earners with unsustainable levels of debt.
Although there is no minimum income or debt levels required to join debt counselling, rather the ratio of debt over income is what is key.
“The reality for South Africans is that salaries do not keep up with rising interest rates and inflation,” said Moonsamy.
“Debt counselling provides a structured way to restore affordability, protect consumers from spiralling debt, and ensure creditors are repaid.
“Seeking help if you need it is a sustainable, responsible way to protect long-term financial well-being.”
Squeeze makes it time to bust debt counselling.
