Every year there is a surge in consumer loans in the period running up to Christmas. Some consumers over-extend themselves financial – partially due it being so easy to take out a loan via an app.
Around Christmas time, many people spend more money than they have available. Many want to shower their loved ones in gifts; Advent, Christmas and New Year offer many occasions for celebrating with family, friends, and colleagues, which also leave a dent in people’s wallets. And the inflation of the last couple of years also weighs in too. Debt counselling services are all too aware of the hangover, experienced in January, when the realisation dawns that people have financially overstretched themselves. For others, the impact is only felt later, when a bill arrives demanding extra payments for electricity and heating costs.
Instant loans, as advertised in banking apps, and which be taken out with a simple click, without any hassle and without having to visit a bank branch, lower the bar for getting into debt, and therefore contribute to this trend. Loans there are advertised in this manner are among the more expensive forms of financing, as they are unsecured and there are higher default rates and loss ratios.
The effective interest rates for consumer lending haven’t been as high as in the last two years in over two decades. Even if the interest rates have fallen back below 10% per year, they still stood at nearly 9.5% per year recently. Recently, taking out new consumer loans has increased significantly.
In the new edition of its consumer publication “Let’s talk about money”, the Austrian Financial Market Authority (FMA) explains about instant loans and their pitfalls. The FMA’s experts in collective consumer protection recommend, amony other things, to ask the following questions, before applying for the loan:
- Do I really need the loan?
- Am I able to make regular repayments?
- Effective annual interest rate – what does the loan really cost?
- There are other lenders than the bank I am with – am I protected myself adequately against fraud?
Further information:
The current edition of “Let’s talk about money” entitled “Debt is just a click away” is available for download on the FMA website at: redenwiruebergeld.fma.gv.at/en/debt-is-just-a-click-away/. All other editions can be found at: redenwiruebergeld.fma.gv.at/en
The official recognised debt counselling services provide tips about what to do if you become overindebted at https://schuldenberatung.at/ (in German only). Tips about budgeting better can be found at https://www.budgetberatung.at/budgetberatung/english/ (more detailed information in German only).
Journalists may address further enquiries to:
Boris Gröndahl (FMA Media Spokesperson)
Telephone: +43 (1) 249 59-6010
Mobile: +43 676 8824 9995
E-Mail: [email protected]