Affordability · Guide
Debt-to-income ratio and discretionary income in South Africa
Your debt-to-income ratio is the share of your income that already goes to debt repayments each month, and lenders look at it to judge whether you can afford a new loan. In South Africa there is no single legal maximum ratio you have to stay under. Approval is based on affordability, not a fixed percentage. This guide explains what a debt-to-income ratio is, what discretionary income means under the National Credit Act, how to work out your own numbers, and how a lender reads them. For the full picture of who qualifies, see the eligibility overview.
What discretionary income means on a loan application
Discretionary income is what is left of your pay after tax and other statutory deductions, minimum living expenses, and your existing debt repayments. It is the amount a lender uses to see whether you can afford a new instalment.
Under the National Credit Act's affordability rules, a lender reaches your discretionary income by starting with your gross income and subtracting your statutory deductions (such as tax and UIF), your minimum living expenses, and your existing monthly debt repayments. What is left is the rand amount available to fund a new instalment — a rand figure, not a percentage.
The full method, including the prescribed minimum living-expense table, is set out in our guide to how an affordability assessment works. This post focuses on what that calculation leaves you with, and on the debt-to-income ratio you can work out for yourself.
What a debt-to-income ratio is
Your debt-to-income ratio, or DTI, is your total monthly debt repayments divided by your monthly income, shown as a percentage. It is a simple self-check tool, not a figure defined or capped in the National Credit Act.
Discretionary income and DTI answer the same underlying question — can you take on more debt — but in different ways.
- Discretionary income is the lender's regulated calculation. It counts your living expenses and gives a rand amount of headroom.
- DTI is a quick ratio you can work out yourself. It ignores living costs and just compares debt to income.
A lender's affordability decision rests on the discretionary-income calculation, not on your DTI. Your DTI is still worth knowing because it gives you a rough sense of how much of your income is already committed before you apply.
How to work out your own DTI
Add up your monthly debt repayments, divide by your gross monthly income, and multiply by 100. That percentage is your debt-to-income ratio.
Count these debt repayments: home loan, vehicle finance, personal loans, credit-card payments, store accounts, overdraft repayments and student loans.
Leave these out: rent, groceries, utilities, insurance and other everyday living costs. Those are living expenses, not debt repayments.
A worked example (illustration only): say you earn R18 000 a month before tax, and your debt repayments add up to R4 500 a month. Your DTI is R4 500 ÷ R18 000 × 100 = 25%.
One thing to decide is which income figure you divide by. Most South African guidance uses gross income (before tax and deductions). If you use your take-home pay instead, the same debts will produce a higher percentage, so always be clear which one you mean. And remember your own DTI is a rough proxy — rent is left out of the ratio but the lender still counts it as a living expense in its affordability check.
Is there a maximum debt-to-income ratio in South Africa
No. South Africa has no single statutory debt-to-income cap for personal loans. The law requires a lender to assess affordability using your discretionary income, not to keep you under a fixed ratio.
You may see figures like 36%, 40% or 50% quoted online. None of these is a legal limit. They are internal guidelines that lenders and debt-industry sources use, and they differ from one lender to the next.
As a rough guide only, some lenders treat a DTI below about 36% as comfortable, 40% and above as stretched, and above 50% as a sign of over-indebtedness. Treat those as lender guidelines, not rules — the sources that quote them do not agree on the exact cut-offs, and some of the higher figures come from home-loan lending, which does not map neatly onto an unsecured personal loan.
The National Credit Act does set numeric limits elsewhere, such as the caps on interest and fees, but none of them is a debt-to-income ratio. The nearest legal idea to "too much debt" is over-indebtedness, and even that is judged on affordability, not a set percentage.
How a lender actually reads your numbers
The lender runs the regulated discretionary-income calculation, pulling your existing debt repayments from your credit-bureau record and validating your income, then checks whether a new instalment still fits.
Two parts of this are worth understanding before you apply.
Your existing debt comes from the bureau. The lender must take into account all the monthly credit repayments showing on your credit-bureau profile. If that record is out of date — a loan you have settled still shows as open, for example — your discretionary income can look smaller than it really is. Checking your own bureau record before you apply is worth the effort.
Your income has to be verified. As part of its affordability duty, a lender will ask you to confirm your income, usually with your latest three payslips or bank statements showing recent salary deposits. Where your income varies from month to month, the lender averages it over at least three pay periods. This is the lender's process for meeting its legal duty to check affordability, not a document rule you have to satisfy on your own. If you earn a variable, commission or freelance income, see the guide on proving income when you are self-employed.
Because every lender weighs these numbers slightly differently, two lenders can reach different decisions on the same application. That is one reason comparing options before you apply is worth doing.
How to improve your position before you apply
Lower the debt side of the ratio and check your record is accurate. Reducing or clearing a small debt, and avoiding new credit in the weeks before you apply, both leave you more room.
A few practical steps:
- Clear or reduce small debts first. Removing even one store account or overdraft repayment lifts your discretionary income.
- Avoid new credit just before applying. A new account or a fresh enquiry can change how your application reads.
- Check your credit-bureau record. Make sure settled debts show as settled and that the amounts are right.
- Be realistic about the amount. Asking for a smaller loan over a term you can comfortably repay is more likely to fit your affordability than stretching for the maximum.
One caution on longer terms. Spreading a loan over more months lowers the monthly instalment, which can help your affordability, but it usually costs more in total interest and fees. A lower monthly repayment is not automatically the cheaper choice. Weigh the monthly comfort against the full cost — the guide on personal loan interest rates and terms explains the trade-off.
BetterLoans is an introducer, not the lender. We pass your details to NCR-registered lending partners who assess your application. Approval depends on affordability and lender checks. No upfront fees, no obligation to accept any offer, and any repayment figure you see is an estimate, not a quote.