Consumer loans are an increasing part of debts among people who have a debt problem

Authors

• Karoliina Majamaa Helsingin yliopisto
• Anna-Riitta Lehtinen Helsingin yliopisto

DOI: https://doi.org/10.30668/janus.126101

Abstract

In the article, we examine the average structure (euro and numerical shares) of the consumers’ debts which were applied for the guarantee for a restructuring loan granted by the Guarantee Foundation. We examine also the change in the applicant structure and the reasons for their over-indebtedness after the 2013 interest rate ceiling reform. The results show that unsecured consumer loans play a central role in the total debts of over-indebted consumers, and their euro-denominated share in total debts increased soon after the reform. Debts originated from instant loans and revolving credits were especially evident if the over-indebtedness was caused by life changes or lack of financial capability. The applicants mentioned these two reasons most often as a main cause of their debt problem. With the reform, the connection between income and over-indebtedness became stronger for those who were over-indebted due to lack of financial capability. The result reflects increasing over-indebtedness among consumers in a good socio-economic position who experience deficiencies in financial capability because of the increased use of larger unsecured consumer loans in terms of euro. In addition to interest rate ceiling reform, it is important to invest in the financial capability of consumers, as well as to ensure the availability of help from outside the consumer credit market.