More installment loans
Shopping with a click of the mouse reinforces the trend towards small loans
Buy now, pay later – such offers are tempting and increasingly popular. Installment loans are generally repaid on time. But consumer advocates warn of risks.
More and more people in Germany are turning to small loans to make purchases on credit. “Buy-now-pay-later offers are becoming increasingly popular,” says Schufa board member Ole Schröder. The credit agency has compiled current data on the subject of installment loans in its “Risk and Credit Compass”.
Buy today, pay tomorrow – that’s tempting for consumers, especially since financing is often advertised for free. “The trend has reached the middle of the population and no longer only applies to young people,” says Schröder.
Trend towards loans under 1,000 euros
According to the latest data from Schufa, almost every second new installment loan taken out is now a small loan of less than 1,000 euros. In 2023, the credit agency based in Wiesbaden counted 4.35 million new contracts in this category. That’s around 14 percent more than a year before.
According to Schufa’s observations, small loans have so far been particularly popular among younger people. In the meantime, the demand for such financing, for example in online trading, has increased, particularly in the middle age groups: the number of ongoing financing has increased among 35 to 39 year olds, 40 to 44 year olds and 45 to 49 year olds Installment loans under 1,000 euros increased by around 30 percent compared to the previous year.
Decline in larger financings
In contrast, Schufa is observing an opposite trend for loans over 1,000 euros: a good 4.84 million new contracts in this category are around eight percent less than a year earlier. Many consumers held back from making larger purchases because prices had risen sharply in the meantime. In addition, installment loans had become significantly more expensive as a result of the key interest rate increases by the European Central Bank (ECB) in 2023.
Overall, the number of newly concluded installment loan agreements in Germany increased slightly from 2022 to 2023 by just under one percent to almost 9.2 million. Together with ongoing contracts, banks had extended a good 19 million installment loans to consumers at the time of the survey.
People in Germany are good debtors – still
Installment loans are predominantly serviced according to the contract: in 98.1 percent of cases, consumers pay the money back reliably, as Schufa has calculated. The proportion of contracts where there were problems with repayment fell from 2.1 percent to 1.9 percent within a year.
“Despite all the crises in recent years: the credit system in Germany is stable,” says Schufa board member Schröder. However, the number of people who had problems with repayment for the first time has increased. “This is not a good development,” warns Schröder.
Warning against over-indebtedness
Consumer advocates regularly warn against over-indebtedness because online shopping can be done quickly with the click of a mouse. This can tempt you to order more than you can actually afford. “Interest can also ensure that you pay significantly more for an item than if you paid immediately,” writes the North Rhine-Westphalia consumer advice center and advises when it comes to “Buy Now – Pay Later”: “Use it Function (…) best only in exceptional cases.”
More protection for mini loans
If you want to take out a loan in Germany, you usually first have to go through a credit check. Part of this is often a credit report from a credit agency – such as Schufa. The check is intended to provide banks and savings banks with information about how high the risk is that a borrower will not repay a loan. Small and short-term loans of up to 200 euros are exempt from such a check – for now.
An EU consumer credit directive came into force on October 30, 2023, which stipulates that an audit must also be carried out when granting such loans. Anyone who borrows money from the bank should in future be informed more clearly about what it costs. The aim is to protect low-income households in particular from excessive debt. The EU member states must implement the requirements into national law by November 20, 2025.
Schufa Risk and Credit Compass Press releases Schufa EU consumer credit guidelines Federal Ministry of Consumer Protection on EU consumer credit guidelines North Rhine-Westphalia consumer center on “Buy now – pay later” Bafin financial regulator on “Buy now – pay later”
dpa
Source: Stern
