South African consumers are increasingly relying on existing credit facilities and turning to short-term borrowing to cope with mounting financial pressure.
Image: File photo.
South African consumers are increasingly relying on existing credit facilities and turning to short-term borrowing to cope with mounting financial pressure, according to TransUnion's South Africa Industry Insights Report for the first quarter of 2026, released on Tuesday.
The report shows a credit market that remains active but is becoming increasingly divided. Traditional banks are tightening lending standards and improving the quality of their loan books, while non-bank lenders and retail credit providers are extending more credit to financially vulnerable consumers seeking immediate liquidity.
"South Africa's Q1 2026 insights highlight a credit landscape that remains active but increasingly segmented," said Ayesha Hatea, Director of Research and Consulting at TransUnion South Africa.
"While demand for credit persists, affordability constraints are reshaping how consumers borrow, with greater reliance on short-term liquidity and higher-risk products."
The split between banks and non-bank lenders is most evident in the personal loans market.
Bank-issued personal loan originations increased by 2.5% year-on-year, while active accounts rose 1.4%. However, banks became more selective in who they financed. Lending to prime-and-above consumers declined by 3.8%, while originations to below-prime borrowers increased by 5%.
Younger consumers also accounted for a growing share of borrowing, with Generation Z representing 23% of all bank personal loan originations, up from 19.5% a year earlier.
The strategy appeared to improve portfolio quality. Delinquency rates on bank personal loans fell by 256 basis points to 26.7%.
The picture was markedly different among non-bank lenders.
Personal loan originations surged 19% year-on-year, while active accounts jumped 27.6%. More than half of all new loans, 53%, were issued to Generation Z borrowers.
Average loan values declined, suggesting consumers are increasingly taking out smaller loans to meet immediate cash-flow needs rather than borrowing larger amounts.
"Bank personal loans are entering a more stable phase characterised by controlled growth, targeted expansion into younger and moderate-risk segments and improved credit performance," Hatea said.
"While non-bank personal loans are expanding financial inclusion and access to liquidity, this growth is being driven by higher-risk and more financially vulnerable segments experiencing rising credit stress, raising important considerations around sustainability and risk management."
Those concerns are reflected in repayment data. Account-level delinquencies on non-bank personal loans climbed 193 basis points to 49.8%, meaning nearly half of all active loans in the sector are seriously in arrears.
The report also found growing financial pressure in the credit card market.
New credit card originations fell 9.5% year-on-year and average credit limits declined by 4.1%, indicating lenders are becoming more cautious.
Despite fewer new cards being issued, outstanding credit card balances grew by 8.8% as existing customers relied more heavily on their available credit.
At the same time, delinquent balances increased by 16%, while account-level delinquency rose 66 basis points to 13.6%.
"While increased utilisation is contributing to balance growth, the faster rise in delinquent balances indicates that repayment pressure is becoming a more persistent driver," Hatea said.
"Credit cards are playing a dual role in the current environment. They are both a liquidity tool, supporting short-term cash flow needs, and a channel where financial pressure is becoming more visible through rising delinquency."
Vehicle asset finance continued to outperform other credit products despite signs of increasing risk.
Originations rose 11.6% year-on-year, with Generation Z and Millennials accounting for 66% of all new vehicle finance.
The market also shifted further towards new vehicle purchases, with more new vehicles than used vehicles being financed during the quarter. More affordable Chinese vehicle brands continued gaining market share, accounting for one in every five vehicle sales.
However, lending to subprime borrowers increased sharply. Originations to this segment jumped 33.5% year-on-year and now account for one-quarter of all new vehicle finance.
Despite this shift, repayment performance improved, with account-level delinquencies falling by 80 basis points to 7.1%.
"Overall, the vehicle asset finance market reflects a complex but resilient environment," Hatea said.
"Demand remains strong, supported by younger consumers and improved access to new vehicles. However, rising exposure to higher-risk borrowers and increasing loan sizes will require enhanced early risk detection tools going forward to enable mobility and inclusion."
The housing market showed modest growth but limited expansion in home ownership.
Outstanding mortgage balances increased by 3.3% year-on-year to R1.29 trillion, although the number of consumers with home loans declined. The growth was largely driven by larger loan values rather than more South Africans entering the property market.
Retail credit produced mixed results.
Clothing accounts continued growing, reaching 18.5 million active accounts, while outstanding balances increased by 6.4%. However, delinquency rates also edged higher, suggesting that many households are finding it increasingly difficult to keep up with repayments on everyday purchases.
Retail instalment lending became more concentrated among fewer borrowers, accompanied by a sharp increase in consumer-level delinquencies.
Retail revolving credit, meanwhile, contracted as both account numbers and outstanding balances declined. However, repayment performance improved, reflecting tighter lending standards that appear to have reduced exposure to higher-risk borrowers.
TransUnion cautioned that the first-quarter data captures conditions before South Africa's latest interest rate increase and the recent acceleration in cost-of-living pressures.
As a result, the company warned that rising stress already evident in non-bank personal loans, credit cards and retail clothing accounts could intensify in the months ahead.
"These trends underscore the need for lenders to balance growth with prudent risk management while supporting sustainable access to credit across the market," Hatea said.
Overall, the report highlights an increasingly divided credit market. Banks are exercising greater caution and seeing stronger repayment performance, while non-bank and retail lenders continue expanding credit to younger and higher-risk consumers who are showing growing signs of financial strain.