Explore how unsecured credit is becoming a vital financial tool for South Africans, revealing the economic pressures driving its use and the insights from recent research.
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The way people use credit often reveals more about their economic reality than income statistics ever could. In an economy where financial shocks are routine, unsecured credit increasingly acts as a stabiliser rather than a tool for occasional splurges, according to a DirectAxis report.
Research by loans provider DirectAxis shows that South Africans typically apply for personal loans to cover emergencies, fund home renovations, and education costs.
The National Credit Regulator’s 2025 Consumer Credit Market Report supports these findings, noting that unsecured credit transactions rose by over 10% year-on-year, with the majority of loans directed towards household needs rather than discretionary spending. The report highlights that personal loans are most often used to manage cash flow gaps, medical expenses, and education fees, underscoring the role of unsecured credit as a financial lifeline rather than a luxury.
“The findings suggest that unsecured credit is primarily used as a pressure valve rather than a lifestyle enabler,” says DirectAxis’ CEO, Yasmin Abrahams. When asked why they applied for a personal loan, 28% said it was to cover emergency expenses. Just under 20% wanted the money to renovate their homes, while nearly 11% said they would spend it on education, she says.
According to the DirectAxis report, smaller but notable proportions of respondents said they used personal loans to start a business (10%) or to purchase or repair a vehicle (8%). Only a small minority reported using unsecured credit for discretionary spending, with 7% citing lifestyle expenses such as celebrations or clothing purchases, and just 2% saying they would use a loan to fund a holiday.
“What’s reassuring is that the vast majority of respondents are not using unsecured credit to fund unnecessary expenditure. This indicates that personal loans are largely being used to manage real financial needs rather than impulse spending", says Abrahams.
The DirectAxis data shows that ease of access also plays a significant role in borrowing decisions. Thirty-five percent of respondents said they chose a personal loan rather than other types of credit because the process is straightforward, while 30% cited speed of approval. Another 30% said they opted for personal loans because they were unable to get other forms of credit.
In terms of borrowing frequency, 26% said they applied for a personal loan only occasionally, typically when faced with unexpected expenses. Fifteen percent said they used unsecured credit for large, one-off purchases such as household appliances. Meanwhile, 21% reported applying for personal loans monthly to make ends meet. Interestingly, 22% of respondents said they had never applied for a personal loan, despite actively using Pulse to monitor their financial wellbeing, it says.
“It’s notable that a significant portion of Pulse users are engaging with the tool to monitor their financial health without necessarily borrowing. At the same time, those who rely on credit to make ends meet could benefit from the budgeting tools and guidance available on Pulse, which are designed to help people make more informed financial decisions," says Abrahams.
PERSONAL FINANCE