Despite worries about finances in times of rising inflation, people in Germany have taken out more installment loans for the first time in four years, according to a study.
In 2021, smaller sums were in demand, especially from young people. Larger purchases, on the other hand, were postponed, as can be seen from the risk and credit compass of the credit agency Schufa. At the same time, consumers proved to be responsible debtors: They paid back their installment loans reliably even in the second year of Corona.
As in the two previous years, 97.9 percent of all installment loans taken out were serviced as contractually agreed. The study said that the pandemic had no negative effects on the indebtedness and over-indebtedness of people in Germany in 2021 either.
High demand for loans under 1000 euros
Last year, Schufa counted around 6.9 million newly concluded installment loans. That was about 4.5 percent more than in 2020. The demand for loans under 1000 euros increased particularly strongly. Their share of all newly concluded contracts rose from 19.9 percent in 2020 to 29.5 percent now. The shares of medium (1000 to 10,000 euros) and large installment loans (from 10,000 euros), on the other hand, declined.
“The Germans are deferring major purchases. This also reflects the mood in our consumer surveys, which we conduct regularly,” explained Schufa board member Ole Schröder. In a survey in May, 57 percent of people said they were putting off major investments.
Energy prices were already driving consumer prices up last year. Inflation averaged 3.1 percent for the year. Further jumps in energy prices as a result of the Ukraine war will exacerbate the development this year.
Buy-Now-Pay-Later offers are popular with boys
According to the information, lower loan amounts were particularly popular with younger people last year. The average amount of the new loans under 1000 euros was around 409 euros across all age groups, but for 18 to 19 year olds it was 343 euros. “The high proportion of low loan amounts, especially in younger, internet-savvy target groups, can obviously be attributed to so-called buy-now-pay-later offers, which are increasingly in demand,” explained Schröder.
This is the purchase on pump by means of online payment services. According to the financial regulator Bafin, with some payment services consumers can subsequently postpone the payment target to a later date or convert the outstanding invoice amount into installment payments. With other payment services, open invoices that a customer has with a retailer are summarized over a certain period of time and only become due later. “These supposedly practical payment solutions can quickly turn out to be a debt trap for young people,” warned Schröder. The Bafin also recently warned that it is easy to lose track.
Consumer advocates criticize that there is often no credit check with this form of financing and that the information before the contract is signed is sometimes insufficient. As a result, consumers could only poorly assess what they were letting themselves in for.
The data collected and evaluated by the Schufa and other credit bureaus is important for millions of people who want to take out loans or sign rental contracts. The credit compass does not include mortgage loans and leasing contracts.