Debt rarely arrives with a bang. Rather, it creeps into our lives one instalment at a time, slowly building until we hardly know where our monthly income is going. Credit is too easy to access in South Africa. Banks, retailers and other credit providers are often too willing to extend credit to new and existing customers.
A new car. A bigger television. A holiday. Furniture for the new house. A credit card balance that gets rolled over. Each purchase can seem manageable on its own. But add them together, and debt can quietly become one of the biggest obstacles to building wealth.
For many South Africans, debt repayments consume an extraordinary proportion of their income — sometimes 30%, 40% or even 50%. At that point, the problem isn’t simply that you owe money. It is that your future income is already spoken for.
The Reserve Bank’s latest data shows that household debt remains substantial: it was equivalent to 61.3% of disposable income in the second quarter of 2026, while the cost of servicing that debt was 9.4% of disposable income.
But these national averages can hide the pain experienced by highly indebted households. There is an opportunity cost to every rand spent servicing consumer debt. If that rand goes towards an instalment, it cannot simultaneously go towards an emergency fund, retirement savings or building wealth. This is why consumer debt is such a silent killer of wealth.
Let’s consider the humble car. A R500,000 car might require an instalment of about R11,600 a month over five years at a typical interest rate of 13.75%. Obviously, this could change depending on the deposit, balloon payment and fees. Over the term of the loan, you will pay about R696,000 for a R500,000 asset. That’s about R196,000 in interest, or 39% of the original purchase price. So when you think you’re buying the car of your dreams for R500,000, don’t kid yourself: it’s more as if you’re paying R700,000 for that vehicle.
But there is another cost that doesn’t appear on the finance agreement: depreciation. The car is simultaneously losing value while you are paying interest on money used to buy it. In other words, you are borrowing money to buy an asset that is generally falling in value.
This doesn’t mean nobody should finance a car. For many households, a car is essential. But it does mean you should think carefully about how much you can afford, rather than how much the bank is prepared to give you.
There are a few tricks to keep debt under control. The first one is surprisingly simple: avoid consumer debt wherever possible, and if you do buy on credit, pay it off at the end of the month. Don’t let the credit roll over. Store and credit cards typically have interest rates of 17%–25%. The compound growth of that interest is crazy — something you want to avoid at all costs. If you want an item that isn’t essential, save for it.
The second trick is even more powerful: if you already have debt, pay more than the minimum whenever you can. This matters most with a home loan because interest is charged on a large outstanding balance over many years.
Take a R1m home loan at 10% over 20 years. The normal monthly repayment is about R9,650. If you simply make that payment for the full 20 years, you will pay about R1.316m in interest — more than the original amount borrowed.
Now imagine that you double your repayment to about R19,300 a month for the first three years instead. After those 36 months, the outstanding balance would have fallen to about R542,000, compared with about R905,000 if you had followed the original repayment schedule. You could then revert to the original R9,650 monthly instalment.
The result is remarkable: the loan would be paid off in about nine years and five months, rather than 20 years. And the interest saving would be about R888,000. That’s almost another R1m that remains in your pocket rather than going to the bank.
The lesson isn’t that everyone should double their bond payment every month. Not everyone can. But if you think of your home loan as your emergency savings fund and push as much of your monthly savings into it as you can, not only will you have access to cash when you need it, you’ll also save yourself money (interest not paid on the loan) in the long term. The lesson here is that small additional payments towards reducing debt can have enormous long-term consequences.
Credit can be deceptive. We tend to think about debt in terms of the monthly payment: “Can I afford a further R2,000 a month?” But wealth is built over decades, so we should instead ask: “What will this decision cost me over the lifetime of the debt, and what could that money have become if I had invested it?” In effect, what is the opportunity cost? That is the more important question.
Debt isn’t inherently bad. A sensible home loan can help a family acquire an appreciating asset or generate rental income. Borrowing to fund a business or education can create future income. The problem is debt that finances consumption without creating future wealth.
The danger is particularly acute when multiple small debts accumulate. A car payment here, a credit card there, a store account, a personal loan, and a few “buy now, pay later” purchases can collectively consume a huge chunk of monthly income.
The antidote is not complicated. Borrow less. Save more. Pay down expensive debt aggressively. And when you don’t have to borrow, don’t. Every rand you don’t have to send to a lender is a rand that can work for you instead.
That is the uncomfortable truth about consumer debt: its greatest cost isn’t necessarily the interest appearing on your statement today. It is the wealth you never get to build tomorrow.
Thomas Brennan is a co-founder of Franc, a South African fintech company
