January 9, 2024

Types of debt in South Africa

Types of debt in South Africa

Debt is a surprisingly common problem that many South Africans face. While there is good debt, where your overall financial standing will be improved, the more common cases are ‘bad debt’, ultimately costing a person more long-term. 

Borrowing money can look completely different from one agreement to the next. The main types of debt include:

Secured Debt

Any debt that is backed by an asset as collateral is considered secure. The collateral is included in the agreement if you cannot repay the loan. 

An example of secured debt would be attached to the loan to buy a car if the dealer places a lien or claim of ownership on the vehicle’s title. If you fail to pay back the lender, your car can be repossessed and sold to recoup the funds.

Unsecured Debt

Unsecured debt, on the other hand, does not have any assets put down as collateral. In this case, the lender does not rely on a claim of ownership because they expect that you will be able to repay the loan in time. A contract is put in place so that, if it comes to it, the lender can sue to reclaim the money owed.

Revolving Debt

The most common example of this kind of debt comes from credit cards. Revolving debt allows a consumer to borrow a limited amount of money regularly, such as a monthly maximum limit.


Home loans stand as the largest debt that consumers have to face. Mortgages are usually large loans which have the real estate put up as collateral.

What is debt consolidation?

Debt consolidation is a large loan which you might take out to pay off several smaller debts. The primary objective in debt consolidation is to reduce the cost of the monthly installments and to pay off credit which might get in the way of having a good credit score. Debt consolidation can lower your interest rate and help you pay off your debt quicker if you qualify for this benefit. 

The advantages of a debt consolidation

  • It is a more convenient method of making loan payments, as it requires only one monthly payment rather than multiple ones.
  • It offers lower interest rates, which can reduce the total amount you need to pay back.
  • It enhances your credit rating, which offers you more opportunities to apply for credit with lower interest rates.


Debtline’s mission is to help people on their journey to a debt-free life. All our counsellors are NCR-registered. As part of our Personal Finance Rescue, we will work with you to draw up a budget after conducting a formal review of your finances. This will be a way to help you save money quickly, significantly improving your long-term financial stability.

Our services also offer negotiations on your behalf with your credit providers to lower the amount that you pay every month.

Personal Financial Rescue also saves you from bankruptcy and insolvency by offering financial advice, budgeting education, and a method of working through your funds so that they can work better for you.