Status: 06/21/2022 09:20 a.m
When buying on credit, consumers used installment loans more frequently in the past year – but with smaller sums. According to the credit agency Schufa, young people are increasingly using online payment services.
More credit agreements, but smaller sums: the risk and credit compass of Schufa identified this trend in installment loans for German consumers for the past year. In view of the crisis caused by the Ukraine war, this trend could intensify.
For the first time in four years, the number of installment loans in Germany increased significantly in 2021. Schufa determined around 6.9 million newly concluded installment loans last year. This corresponds to an increase of 4.5 percent compared to 2020. Smaller sums 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 almost 30 percent. In 2020 it was 19.9 percent.
“Buy now, pay later” among young consumers
The increase in installment loans with small sums is mainly due to the younger age group and an increased supply of quick loans. The average amount of new loans under 1,000 euros was around 409 euros across all age groups, but 343 euros for 18 to 19-year-olds: “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 offerings 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 big credit charges?
Loans for large purchases, on the other hand, declined last year. The shares of medium (1000 to 10,000 euros) and large installment loans (from 10,000 euros) were less in demand. “The Germans are putting off major 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 two previous years, 97.9 percent of all installment loans taken out were serviced as contractually agreed. According to Schufa, the pandemic did not have any negative effects on the indebtedness and over-indebtedness of people in Germany in 2021 either.
Confidence in financial security decreased
It remains to be seen whether the consequences of the Ukraine war on many Germans will change their credit behavior and payment practices. According to a recent survey by Teambank, confidence in their own financial security has fallen among many people in Germany against the background of the Ukraine war. “The Russian war of aggression has once again dampened the mood significantly,” said the head of the team bank, Frank Mühlbauer.
Nationwide, the so-called liquidity index was 11.5 before the start of the war – in March it fell to seven points. According to the team bank, the liquidity index describes the self-assessment of people in Germany with regard to their own financial situation. The survey is based on a survey of more than 3,000 citizens aged 18 to 79. The Nuremberg team bank specializes in granting installment loans.