With the global economy in a crisis, debt levels are at an all-time high. The United States of America’s national debt exceeds $14 trillion and the South African outstanding gross consumer credit book is at R1,39 trillion. This pattern of debt levels is seen worldwide, with various adverse effects on the debtors and the economy in general. Although debt is an important mechanism in the growth of an economy, the amount of debt must be managed. Unsecured debt is a higher risk loan offered to debtors who cannot support the debt through any form of security. Default on this type of debt leaves the creditor with only a few options to recover the debt. It is thus important to understand the reasons for these defaults in order to manage the debtor and the risk associated with these loans.
This study investigates the default rate and demographics of unsecured debt defaulters. A large study population is analysed to determine the total default rate and demographics of the defaulting debtors. The aim is to get a better understanding of the risk involved in unsecured debt in order to manage the credit vetting process more efficiently. Factors including loan size, number of loans, geographic distribution, gender and the age of debtors are studied to determine the profile of a typical debt defaulter. This is then compared to the non-defaulting population.
The research findings confirm that there are statistically significant correlations between loan size, number of loans, geographic distribution, gender and age and the number of defaults in the population. The practical significance is, however, weak. It further proves that the profile of a defaulting debtors’ book is the same as the initial debtors’ book. A further challenge will be to incorporate affordability and other relevant data to understand the defaulting population and the reasons for default better. / MBA, North-West University, Potchefstroom Campus, 2014
| Identifer | oai:union.ndltd.org:NWUBOLOKA1/oai:dspace.nwu.ac.za:10394/10811 |
| Date | January 2014 |
| Creators | Van Emmenis, Armand Pieter |
| Source Sets | North-West University |
| Language | English |
| Detected Language | English |
| Type | Thesis |
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