South African households are becoming more dependent on the credit facilities they already hold and are turning increasingly to short-term borrowing as they try to manage growing financial strain, according to TransUnion’s South Africa Industry Insights Report covering the first quarter of 2026, which was published on Tuesday.
Key Takeaways
- Widening lender divide: Banks are tightening standards and improving loan quality, while non-bank lenders and retail credit providers are extending more credit to financially vulnerable, higher-risk consumers.
- Generation Z driving growth: Younger borrowers now make up a growing share of both personal loans and vehicle finance, with non-bank lenders in particular seeing over half their new loans go to this group.
- Rising repayment stress: Delinquencies are climbing across non-bank personal loans, credit cards and retail clothing accounts, and TransUnion warns this pressure could worsen once recent interest rate hikes and cost-of-living increases are fully reflected in the data.
A Credit Market Splitting In Two
The findings point to a lending environment that is still active overall, but which is becoming more clearly divided along two lines. On one side, traditional banks are pulling back on riskier lending and tightening their approval standards in an effort to strengthen the overall quality of their loan books. On the other, non-bank lenders and retail credit providers are doing the opposite, extending more credit to financially strained consumers who are searching for quick access to cash. Oversight of this space falls largely to the National Credit Regulator, which monitors lending practices across both banks and non-bank providers.
Ayesha Hatea, Director of Research and Consulting at TransUnion South Africa, explained that the first quarter figures for 2026 point to a credit environment in South Africa that continues to see activity, yet is becoming ever more fragmented between different types of lenders.
She added that although consumers are still seeking out credit, the pressure of affordability is changing the way they borrow, pushing more of them towards short-term solutions and riskier lending products in order to get by.
Financial advisers generally recommend that short-term, high-interest borrowing be used only for genuine emergencies, since relying on it for everyday expenses can quickly compound existing debt.
Personal Loans Show A Widening Gap
Nowhere is the divide between banks and non-bank lenders more visible than in the personal loans sector.
Banks Tighten Their Belts
Personal loan originations issued by banks climbed by 2.5% compared with the same period a year earlier, and the number of active accounts grew by 1.4%. Even so, banks have become noticeably choosier about who they are willing to lend to.
- Lending to consumers rated prime and above fell by 3.8%
- Lending to below-prime borrowers, by contrast, rose by 5%
- Generation Z consumers made up 23% of all bank personal loan originations, an increase from 19.5% during the same period last year
This more cautious approach appears to be paying off in terms of loan performance. Delinquency rates on bank-issued personal loans dropped by 256 basis points, bringing the rate down to 26.7%.
A “basis point” is simply one hundredth of a percentage point, so a move of 256 basis points equals a change of 2.56 percentage points, a term commonly used in banking to describe small but meaningful shifts in rates.
Non-Bank Lenders Tell A Different Story
Among non-bank lenders, the picture looks markedly different. Personal loan originations shot up by 19% year-on-year, while the number of active accounts increased by a substantial 27.6%. Generation Z borrowers accounted for more than half of all new loans issued in this space, representing 53% of the total.
Average loan values, meanwhile, have been falling, which suggests that consumers are opting for smaller loans to cover urgent cash-flow gaps rather than borrowing larger sums for bigger purchases.
Hatea noted that bank personal loans appear to be entering a steadier phase, marked by measured growth, a deliberate push into younger and moderately risky customer segments, and better overall credit performance.
She went on to say that while non-bank personal loans are helping to widen financial inclusion and improve access to liquidity, this expansion is being fuelled largely by higher-risk and more financially vulnerable groups who are experiencing growing credit stress, which raises real questions around the long-term sustainability of this lending and how well it is being managed from a risk perspective.
These concerns are borne out in the repayment figures. Delinquencies on non-bank personal loans, measured at account level, climbed by 193 basis points to reach 49.8%, meaning that close to half of all active loans in this part of the market are now seriously behind on repayments.
A loan is generally classed as “seriously delinquent” once repayments fall around 90 days or more overdue, a threshold widely used across the credit industry to flag accounts at high risk of default.
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Credit Card Market Under Growing Pressure
The report also identified rising financial strain within the credit card sector.
New credit card originations declined by 9.5% compared with the previous year, and average credit limits were cut by 4.1%, both signs that lenders are adopting a more careful stance.
Despite fewer new cards being handed out, outstanding balances on existing credit cards grew by 8.8%, as current cardholders leaned more heavily on the credit already available to them.
At the same time, delinquent balances rose by 16%, and the account-level delinquency rate increased by 66 basis points to reach 13.6%.
| Credit Card Metric | Year-on-Year Change |
|---|---|
| New card originations | Down 9.5% |
| Average credit limits | Down 4.1% |
| Outstanding balances | Up 8.8% |
| Delinquent balances | Up 16% |
| Account-level delinquency rate | Up 66 basis points to 13.6% |
According to Hatea, while rising utilisation is playing a part in the growth of overall balances, the fact that delinquent balances are increasing at a faster pace points to repayment pressure becoming a more lasting and persistent feature of the market.
She further explained that credit cards are currently serving two roles at once. They function as a liquidity tool that helps consumers manage short-term cash flow difficulties, while also acting as a channel through which mounting financial pressure is becoming increasingly visible, reflected in rising delinquency figures.
Vehicle Finance Remains Resilient, But Risk Is Building
Vehicle asset finance continued to perform more strongly than other categories of credit, even as signs of increasing risk began to emerge within the sector.
Originations in this category increased by 11.6% year-on-year, with Generation Z and Millennial consumers together accounting for 66% of all new vehicle finance agreements.
The market also continued shifting in favour of new vehicles, with more new cars being financed during the quarter than used ones. More affordable Chinese vehicle brands kept gaining ground, now accounting for one in every five vehicles sold.
However, lending to subprime borrowers rose sharply, with originations to this group jumping by 33.5% year-on-year. Subprime borrowers now make up a quarter of all new vehicle finance agreements.
Despite this shift towards riskier lending, repayment performance actually improved, with account-level delinquencies falling by 80 basis points to 7.1%.
Hatea described the vehicle asset finance market overall as complex yet resilient. She said demand remains strong, buoyed by younger consumers and improved access to new vehicles, but cautioned that the growing exposure to higher-risk borrowers, combined with increasing loan sizes, will require better early risk detection tools going forward in order to keep supporting both mobility and financial inclusion.
Housing Market Grows, But Ownership Stalls
The housing sector recorded modest growth overall, though this did not translate into a meaningful increase in home ownership.
Outstanding mortgage balances rose by 3.3% year-on-year, reaching a total of R1.29 trillion, even though the actual number of consumers holding home loans decreased. This growth was driven mainly by larger individual loan values rather than by more South Africans entering the property market for the first time.
Retail Credit Sends Mixed Signals
The retail credit space produced a mixed set of results across its different categories.
Clothing Accounts
Clothing accounts kept growing, with active accounts reaching 18.5 million and outstanding balances increasing by 6.4%. At the same time, delinquency rates on these accounts also moved higher, suggesting that a growing number of households are struggling to keep up with repayments even on everyday retail purchases.
Retail Instalment Lending
Retail instalment lending became more concentrated among a smaller pool of borrowers, and this was accompanied by a sharp rise in delinquencies measured at the consumer level.
Retail Revolving Credit
Revolving credit refers to accounts such as retail store cards that allow repeated borrowing up to a set limit, as opposed to instalment credit, where a fixed amount is borrowed and repaid over a set period. A distinction covered in more detail in our guide on what is a revolving loan.
A Warning For The Months Ahead
TransUnion cautioned that the first-quarter figures reflect conditions before South Africa’s most recent interest rate increase and before the recent acceleration in the cost of living took hold. As we noted in our earlier piece on why an interest rate hike was becoming increasingly likely, borrowers have been bracing for this shift for some time.
Because of this timing, the company warned that the strain already showing up in non-bank personal loans, credit cards and retail clothing accounts could deepen further in the coming months.
Hatea stressed that these trends highlight the need for lenders to strike a balance between pursuing growth and maintaining prudent risk management, while still supporting sustainable access to credit throughout the market.
Conclusion
South Africa’s Q1 2026 credit landscape reflects a market pulling in two directions at once: banks tightening standards and reaping the benefits of stronger loan performance, while non-bank lenders and retail credit providers fuel growth by extending credit to younger and more financially strained consumers. With the full effects of the latest interest rate hike and rising living costs yet to show up in the figures, the strain already visible in non-bank personal loans, credit cards and retail accounts may well deepen in the coming months, making prudent risk management and sustainable lending practices more important than ever.
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