Vehicle debt more than half of Namibia’s secured debt
In a recent analysis assessing consumer credit-behaviour Compuscan’s data revealed that the most common account type that belonged to a sample group of just over 106 000 credit-active Namibian consumers as at the end of the second quarter of the year (Q2 2016), was vehicle and asset finance (VAF). This sample database included information on select types of credit, excluding microloans.
The number of VAF loans totalled 248 353, which made up 53% of the number of all loan types considered in this analysis (refer to graph 1 – editor’s note). Although there were a high number of VAF loans that had been extended to consumers, the balance of this debt as at the end of Q2 2016 amounted to N$ 744.9 million – a comparatively low figure (refer to graph 2 – editor’s note).
By contrast, mortgages only made up 2% of the total number of accounts included in the analysis. In other words, of the total 472 396 accounts considered, only 9 477 were mortgages, yet the open balance owed by consumers on mortgages as at the end of Q2 2016, was a significant N$ 2.8 billion which makes up 55% of the total open balance of all Namibian consumer accounts listed on this database (N$ 5.2 billion).
Comments Corné van Niekerk, Compuscan Namibia Sales Manager: “Many consumers might automatically assume that credit is bad, or that it gets them into trouble. But the truth is that credit has the power to open the door to opportunity – it allows one to purchase a vehicle, to invest in home or to start up a business. The problem with credit arises when consumers don’t manage their debt responsibly.”
While Compuscan’s data reflects that 64.2% of the accounts studied were performing (i.e. they were not in arrears) as at the end of Q2 2016, there were those that were 3+ months in arrears (4.4%), those that had been subject to adverse enforcements (1.9%), those that had required legal action to be taken (0.4%), and those that had been written off (1.3%).
Despite the fact that the number of accounts that were not being managed well were much fewer than those that had been paid up, Compuscan’s data revealed that only 30% of the consumers included in the analysis were considered average to minimum risk as at the end of the second quarter. On the other hand, the average credit-active consumer in the sample group was considered a high risk borrower at the time of analysis, with a credit score of 607. The below table indicates the various scoring bands and the associated risk.
A consumer’s score is a three-digit number, calculated using both positive and negative data that predicts how likely they are to honour their future credit agreements. The amount, or NAD value, of credit that a consumer has does not have a major impact on their score, as it is predominantly calculated by considering the consumer’s repayment behaviour. As such, if the consumer is a “bad payer”, his or her score will reflect this, and therefore it is important that a positive payment history is built up.
It is imperative that consumers do not skip payment of their monthly instalments. It must be noted that scoring will differ at each credit bureau as scores are calculated differently at each institution.
Comments van Niekerk further: “At Compuscan, we place special emphasis on ensuring that our data is up to date. This allows us to accurately calculate a consumer’s credit score, providing a true reflection of the consumer’s ability to manage their debt. This not only assists credit providers in making an informed decision about whether or not to extend credit to a consumer, or how much, but it also protects the consumer from over-extending themselves. This is why it is important for consumers to regularly check their credit reports to ensure that they are managing their finances wisely.”
A credit report is a complete record of a consumer’s financial history, detailing information on his or her borrowing and spending habits, payment trends and contact details. It tracks every account the consumer opens, every payment he or she skips, every judgment taken against him or her and every cent that the consumer owes his or her creditors.
It is important for credit-active consumers to keep a close eye on account activity under their name to prevent and recover from identity fraud. Often consumers only find out that they have been a victim of impersonation when checking their credit report to apply for a home loan, store finance, car finance, etc. or when their request for credit is denied.
Additionally, it is advised that even consumers who do not have credit monitor their credit report to ensure that their personal details, such as their contact number, address or employment information, are up to date. Where information is not correct, consumers are allowed to dispute the information with the credit bureau’s dispute department.
Comments van Niekerk in conclusion: “While it is assumed that some things are easier said than done, there are in fact some basic steps that consumers can follow to maintain or improve their creditworthiness, even if they have fallen behind with their repayments. It is never too late to start working towards a healthier credit profile.”
Total number of accounts:
The second highest number of loans recorded on the database that was studied, following VAF loans, were credit cards (21%), followed by fixed-term (short-term) loans (14%). The number of these three account types, combined, made up 88% of all accounts considered – see the below graph.