Private debt: Germans use installment loans more often

Status: 06/21/2022 09:20

Buying on credit, consumers have used installment loans more frequently over the past year, but with smaller amounts. According to the credit agency Schufa, young people are increasingly using online payment services.

More credit agreements, but smaller amounts: Schufa’s credit and risk compass has identified this trend in installment loans for German consumers over the past year. In view of the crisis caused by the war in Ukraine, this trend could intensify.

For the first time in four years, the number of installment loans in Germany increased significantly in 2021. Schufa determined some 6.9 million newly concluded installment loans last year. This corresponds to an increase of 4.5% compared to 2020. Amounts of less than 1000 euros were financed on credit much more often than in previous years. Their share of all newly concluded contracts is now nearly 30 percent. In 2020 it was 19.9%.

“Buy now, pay later” among young consumers

The increase in installment loans with small amounts is mainly due to the younger age group and a greater supply of fast loans. The average amount of new loans under € 1,000 was around € 409 for all age groups, but € 343 for young people between 18 and 19: “The high percentage of low loans, especially in groups younger and more Internet-savvy targets, it can obviously be attributed to the so-called Buy-Now-Pay-Later offers that are increasingly in demand ”.

In most cases, online payment services are used, with which the payment target can be postponed to a later date or the open invoice amount can be converted into an installment payment. However, these supposedly practical payment solutions can quickly turn out to be a debt trap for young people, according to the credit agency.

Afraid of Large Credit Charges?

Loans for large purchases, on the other hand, declined last year. The shares of medium installment loans (from € 10,000 to € 10,000) and large (from € 10,000) are less requested. “The Germans are putting off important purchases. This also reflects the mood in our consumer surveys, which we conduct regularly,” says Schufa board member Ole Schröder.

Overall, the Germans remain very reliable debtors, as the study shows. As in the previous two years, 97.9 percent of all borrowed installments were served as contractually agreed. According to Schufa, even in 2021 the pandemic had no negative effects on the indebtedness and over-indebtedness of people in Germany.

Confidence in financial security has declined

It remains to be seen whether the consequences of the war in Ukraine on many Germans will change their credit behavior and their payment habits. According to a recent Teambank survey, confidence in their financial security has declined among many people in Germany against the backdrop of the war in Ukraine. “The Russian war of aggression has once again dampened the mood significantly,” said the team’s bank head, Frank Mühlbauer.

Nationally, the so-called liquidity ratio was 11.5 before the war began – in March it dropped to seven points. According to the team bank, the liquidity index describes the self-assessment of people in Germany with respect to their financial situation. The survey is based on a survey of over 3,000 citizens between the ages of 18 and 79. The team bank from Nuremberg specializes in the granting of installment loans.

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