Few requirements in South African consumer credit law are as frequently misunderstood as the affordability assessment. Many borrowers encounter it only as a reason for a declined application. In reality, it is one of the National Credit Act’s most important safeguards against over-indebtedness.
Section 81 of the Act requires a registered credit provider to take reasonable steps to establish whether the consumer can realistically repay the proposed credit without becoming over-indebted. This involves several processes. First, the consumer’s income must be verified. Pay slips, bank statements are used to confirm that declared earnings are accurate and sufficiently consistent. When income is irregular, seasonal, or cash-based, the lender needs to establish what income can reasonably be relied on when assessing affordability.
Second, existing financial obligations are taken into account. These include other loans, store accounts, vehicle finance, insurance premiums, maintenance orders, and any other fixed commitments that already claim a portion of monthly income. Third, essential living expenses are considered. Section 23 of the National Credit Regulations prescribes minimum expense norms according to income band and lenders may not assume living costs lower than these prescribed amounts.
What remains after these deductions is discretionary income. That residual amount must be sufficient to cover the proposed new repayment. If it is not, the credit provider is obligated to decline the application.
A lender that does not carry out these checks has not found an easier route to credit; it has skipped the safeguards designed to protect a consumer. A ‘yes’ without the necessary checks should therefore be a red flag rather than a cause for celebration. An operator willing to extend credit without properly assessing affordability is operating outside the protections the National Credit Act exists to provide.
Lenders that grant credit without properly assessing a consumer’s ability to afford the repayment risk the agreement being declared reckless. If a provider is found to have granted credit recklessly, the consumer’s obligation to repay the loan can be waived. A registered lender found to have approved a loan recklessly, can also face hefty fines and, in certain circumstances, the cancellation or suspension of its registration with the National Credit Regulator.
This framework exists primarily to protect consumers. South Africa’s credit market has long struggled with high levels of household debt relative to income. Recent data continues to illustrate the pressure. DebtBusters’ Q2 2026 Debt Index found that consumers applying for debt counselling still needed 64% of their take-home pay to service existing debt. Among those earning more than R50 000 a month, the figure reached 103%. The average number of concurrent credit agreements among applicants stood at 8.7, one of the highest levels recorded in recent years.
At the same time, total debt among lower-income consumers has declined by up to 23% since 2021. While this appears to be an improvement, DebtBusters attributes much of this reduction to tighter credit access rather than improved financial health. This raises legitimate questions about whether the broader regulatory framework is keeping pace with economic realities. But that is a different issue from the purpose of an affordability assessment.
An affordability assessment does not determine whether consumers should have access to credit generally. Its purpose is much narrower: to establish whether a particular consumer, with their income and existing obligations, can afford a particular loan without becoming over-indebted. The broader challenge is ensuring that the regulatory framework also allows responsible lenders to continue serving consumers who can afford to borrow.
Consumers can improve their position before applying. Accurate income documentation that matches bank deposits strengthens the verification step. Clearing small arrears or settling minor accounts can reduce existing monthly commitments. Spacing out applications avoids the appearance of financial distress that multiple recent enquiries can create. Reviewing a credit report for errors is also worthwhile; consumers are entitled to their information from registered credit bureaus and can dispute inaccuracies through formal processes.
None of this guarantees an approval, and for some consumers a decline will still be the appropriate outcome. But the financial need that prompted the application does not simply disappear when it is declined. That is where a different risk emerges. Consumers turned away by registered lenders sometimes turn to unregistered operators, who conduct no assessment and offer none of the protections of the Act. These arrangements frequently involve unlawful demands for bank cards, SASSA cards, or identity documents as security. The short-term “yes” often exacts a far higher long-term cost.
An affordability assessment is not a judgment on a person’s character or worth. It is a snapshot of financial circumstances at a particular moment, measured against rules that apply equally across the regulated market. Those circumstances change as income, existing debts and household obligations change, and a future assessment may therefore produce a different outcome.
Understanding the assessment does not eliminate the disappointment of a decline. It does, however, clarify that the decision rests on documented evidence rather than arbitrary discretion. In a market where over-indebtedness remains a persistent challenge, affordability assessments are an essential protection. But they must sit within a broader credit system that also keeps regulated lending accessible and gives consumers safe alternatives when credit cannot responsibly be extended. Sometimes the responsible decision is to say no; the wider challenge is ensuring that a regulated “no” does not leave an illegal lender as the only “yes”.
Written by Nita Morgan, Chief Executive Officer of Prime Loans