South African households are changing the way they borrow and manage credit as pressure on household budgets continues, according to TransUnion’s Q1 2026 South Africa Industry Insights Report, which found that overall appetite for credit held up reasonably well even as differing risk patterns become more apparent across credit products and providers, with consumers leaning more on the credit facilities they already hold while also turning towards more easily obtainable lending products, typically used by higher-risk borrowers, to cope with short-term cash flow needs.
Key Takeaways
- Existing cardholders, not new ones, are driving balance growth: originations fell 9,5% year-on-year, yet outstanding balances still rose 8,8%, showing the market’s expansion is now coming from consumers spending more on cards they already hold rather than from new card uptake.
- Repayment pressure is outpacing utilisation as the real driver of debt growth: delinquent balances climbed 16% year-on-year, faster than overall balance growth, indicating that slower repayment, not just higher spending, is behind the rising numbers.
- Credit cards are doing double duty as both a lifeline and a warning sign: the same product that helps consumers bridge short-term cash flow gaps is also the channel where financial strain is becoming most visible, with account-level delinquencies up 66 basis points to 13,6%.
Diverging Trends in Bank and Non-Bank Personal Loans
The personal loan sector kept showing two very different paths depending on whether the lender was a bank or a non-bank institution during the quarter under review. This split mirrors broader findings discussed in our earlier report on how personal loan defaults hit record highs among certain borrower segments.
Bank Personal Loans Show Controlled Growth
New bank personal loan originations climbed by a modest 2,5% year-on-year, and the total number of active accounts grew by 1,4% across the same stretch of time. Digging beneath that top-line growth figure uncovers a change in the mix of borrowers by risk category, with below-prime originations climbing by 5,0% even as originations among prime and higher-tier borrowers fell by 3,8%. Involvement from Gen Z borrowers also grew markedly, with originations from this age group up 21% year-on-year, lifting their portion of total bank personal loan originations to 23%, an increase from the 19,5% recorded in Q1 2025.
Repayment performance in the bank personal loan category also strengthened, with account-level delinquencies of three months or more in arrears (also called MIA) falling by 256 basis points to 26,7%. This improvement points to stricter lending criteria, a settling of the overall portfolio, and better repayment habits following the financial strain seen in earlier periods.
“MIA” (Months In Arrears) is a standard credit bureau term. A “3+ MIA” delinquency means the borrower has missed at least three consecutive monthly repayments, a threshold most credit bureaus use to flag serious repayment risk.
Non-Bank Personal Loans Expand Rapidly Amid Rising Risk
By contrast, personal loans from non-bank lenders kept growing at pace. Originations rose by 19,0% year-on-year, while the count of active accounts jumped by 27,6%. Younger borrowers were largely responsible for driving this expansion, with Gen Z consumers making up 53% of all originations recorded during the quarter.
Alongside this, the shape of non-bank personal lending has also shifted. Average loan sizes and outstanding balances are trending downward, signalling a move towards smaller, more frequent borrowing habits. This pattern reflects both a preference among lenders for smaller, shorter-term exposure and continued consumer appetite for readily available liquidity, with these loans increasingly being used to bridge short-term cash flow gaps rather than to fund larger, more structured borrowing needs.
That said, this fast pace of growth has come hand in hand with mounting risk. Account-level delinquencies rose by 193 basis points to 49,8%, meaning delinquency rates are now creeping towards the halfway mark across all active non-bank personal loans. This underlines the degree of strain building within the segment and points towards mounting pressure among borrowers who are already considered higher risk.
Ayesha Hatea, director of research and consulting at TransUnion South Africa, explains that bank personal loans are moving into a steadier phase, one defined by measured growth, deliberate expansion into younger and moderate-risk consumer groups, and stronger credit performance overall. She adds that although non-bank personal loans are widening financial inclusion and improving access to liquidity, this expansion is being fuelled by segments of the population that are higher risk and more financially exposed, groups that are experiencing growing credit stress, which raises meaningful questions about the sustainability of this growth and how well it is being risk-managed.
Bank Versus Non-Bank Personal Loans at a Glance
| Metric | Bank personal loans | Non-bank personal loans |
|---|---|---|
| Originations growth (YoY) | 2,5% | 19,0% |
| Active accounts growth (YoY) | 1,4% | 27,6% |
| Gen Z share of originations | 23% (up from 19,5% in Q1 2025) | 53% |
| Below-prime/higher-risk originations | Up 5,0% | Growth largely risk-driven |
| Prime and above originations | Down 3,8% | Not applicable |
| Account-level delinquencies (3+ MIA) | 26,7% (down 256 bps) | 49,8% (up 193 bps) |
Basis points, often shortened to “bps”, are a common way to measure small percentage changes in finance. One basis point equals 0,01%, so a 256 basis point drop is the same as a 2,56 percentage point decline.
Reliance on Credit Cards Increased as Repayment Pressure Grew
The credit card market also revealed a notable change in what is driving its growth, with the expansion of balances now being driven mainly by existing cardholders rather than by the issuing of new cards. The volume of new originations fell by 9,5% year-on-year, and average credit limits were trimmed by 4,1% year-on-year, both of which point to a more careful approach being taken by lenders.
Balances and Delinquencies Climb as Repayment Slows
Even so, total outstanding balances increased by 8,8% year-on-year, a rise supported by greater card utilisation as well as growing repayment pressure that has pulled down the rate at which cardholders are settling their balances. The number of active cardholders increased by 6,4%, while the average balance held per account rose by 2,5%.
Delinquency levels also climbed year-on-year, with account-level delinquencies increasing by 66 basis points to reach 13,6%, and the value of delinquent balances rising by 16% year-on-year. This rise in delinquencies, coupled with lower repayment rates, has contributed to the overall increase in total account balances seen over the past twelve months. Broader inflation and cost-of-living pressures tracked by Statistics South Africa help explain much of the squeeze behind these numbers.
Hatea notes that while increased utilisation is playing a role in the growth of balances, the fact that delinquent balances are rising at a faster pace suggests that repayment pressure is turning into a more lasting feature of the market. She points out that credit cards are currently serving two functions at once, acting as a source of liquidity that helps consumers manage short-term cash flow, while also becoming a channel through which financial strain is increasingly showing up in the form of rising delinquency.
Card utilisation refers to the proportion of a consumer’s available credit limit that is actually being used. Financial advisers generally recommend keeping utilisation below 30% of the total limit, as high utilisation is often linked to a lower credit score.
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Resilient Demand for Vehicle Asset Finance Supported by Increased Access to New Vehicles
Vehicle finance continued to show steady, ongoing growth, buoyed by strong take-up among younger consumers. Gen Z and Millennial borrowers together now make up two-thirds (66%) of all originations in this category, which grew by 11,6% year-on-year. This underscores continued demand for personal mobility, while also highlighting the increasingly important part that first-time and early-career borrowers play in keeping the market active.
At the same time, there has been a distinct shift in the make-up of vehicle financing, with the ratio of used to new vehicles slipping to 0,93. In practical terms, this means more new vehicles are now being financed than used ones, which is structurally pushing up average origination values. Notably, this shift has taken place even as more budget-friendly new entrants, Chinese vehicle brands in particular, have gained ground in the local market, with one in every five vehicles sold now coming from these manufacturers.
Subprime Borrowing Rises Alongside Repayment Resilience
On the risk side of things, subprime originations have grown considerably, rising by more than 33,5% year-on-year and now making up a quarter (25%) of all new vehicle finance agreements. This suggests that market growth is increasingly being propelled by higher-risk consumer segments, as lenders try to strike a balance between expanding their books and keeping overall lending volumes up.
Even with this rise in borrowing among riskier consumers, repayment behaviour actually improved, with account-level 3+ MIA delinquencies falling by 80 basis points to 7,1%, a sign that borrowers are managing their vehicle finance obligations relatively well.
- Vehicle finance originations: up 11,6% year-on-year
- Gen Z and Millennial share of originations: 66%
- Used-to-new vehicle finance ratio: 0,93
- Subprime originations: up 33,5% year-on-year, now 25% of the total
- 3+ MIA delinquencies: down 80 bps to 7,1%
The used-to-new vehicle ratio is a useful indicator of consumer confidence. A ratio below 1,0, as seen here, generally suggests buyers are more willing to commit to bigger, longer-term repayments on new vehicles rather than opting for cheaper second-hand alternatives.
Hatea describes the vehicle asset finance market as a complex yet resilient environment overall. She explains that demand remains firm, helped along by younger consumers and better access to new vehicles, though she cautions that rising exposure to higher-risk borrowers, combined with growing loan sizes, will call for improved early risk detection tools going forward in order to keep mobility and financial inclusion sustainable.
What This Means for South Africa’s Credit Market
According to Hatea, the insights drawn from South Africa’s Q1 2026 credit data point to a market that remains active overall but is becoming increasingly segmented by risk and borrower profile. She notes that while the appetite for credit has not let up, affordability constraints are changing the way consumers borrow, pushing them towards greater dependence on short-term liquidity and on products aimed at higher-risk borrowers. These patterns, she adds, highlight the importance of lenders finding the right balance between pursuing growth and maintaining sound risk management, all while continuing to support sustainable access to credit throughout the broader market.
“Prime” and “subprime” are credit risk categories based on a borrower’s credit score. Prime borrowers are considered lower risk and typically qualify for better interest rates, while subprime borrowers, often due to a limited or troubled credit history, are seen as higher risk and usually pay more for credit.
Conclusion
These trends point to a credit card market that is growing in a way that looks healthy on the surface but carries more risk beneath it, with rising balances increasingly tied to consumers struggling to keep up with repayments rather than to fresh demand for new cards. As delinquent balances continue to outpace overall balance growth, credit cards are proving to be both a valuable buffer for short-term cash flow needs and an early indicator of where financial pressure on households is building, a dynamic that lenders will need to watch closely as they weigh continued growth against the risk of deteriorating repayment behaviour. Consumers looking to get ahead of this trend can find practical steps in our guide on how to pay off credit card debt.
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