Scrapping bonuses and zero-interest financing are actually causing the number of loans to rise – the consequences of the economic crisis are not expected until 2010
Frankfurt/Main
– Anyone who wants to incur debt in Germany will still have no problems with it. “There is currently no credit crunch for consumers,” said Rainer Neumann, CEO of the credit reporting agency Schufa. In the first half of the year, banks even granted 20 percent more loans to consumers than in the same period last year. Neumann attributed this primarily to the increased number of car purchases as a result of the scrappage bonus. In addition, retailers, especially electronics markets, have increasingly attracted people with “attractive financing offers”. For example, Media Markt advertised “zero-interest financing” for weeks.
There is still no sign of an economic crisis in the Schufa data. “People didn’t take out installment loans because they were short of money, but because they were consuming a little more than in the previous year,” said Neumann. The average Schufa rating of a consumer’s creditworthiness has not worsened. The number of failures is also at a “stable level”. Only for 2.5 percent of loans will the installments no longer be paid at some point – a value that has hardly changed in recent years.
However, Neumann does not expect that the banks will continue to finance life on credit in the same way as in the past few months. “I assume that the economic crisis will become visible in our debtor data from the second quarter of 2010.” Then ten to 15 percent higher failure rates can be expected. This will inevitably have an impact on the awarding practices of the institutes. “The number of loans will decline next year,” said the Schufa boss. After experiencing previous economic downturns, it would take months for customers to have problems with rates. First the number of unemployed and private bankruptcies must increase.
The Wiesbaden-based company provides banks, savings banks and retailers with information on consumers’ creditworthiness. According to its own information, Schufa has the largest nationwide data pool with 440 million pieces of information from 65 million citizens. This includes information on the number of current accounts and credit cards, whether loans have been repaid properly to date or whether a loan has already fallen through. Account balance or income are not stored with Schufa.
Overall, Germans submitted 25 percent more applications for installment loans in the first half of the year. In total there were almost 9.6 million. Neumann did not attribute the fact that the number of loans actually approved only increased by 20 percent to greater reluctance on the part of financial institutions. “According to our data, installment loans are no longer being rejected.” Rather, consumers are realizing that they should compare the conditions of different providers before signing a credit agreement.
In the first two quarters of this year, customers primarily received installment loans of more than 3,000 euros (see graphic). This is primarily about partial financing of car purchases or down payments for leasing contracts. In addition, banks often lend 1,000 euros or less. In the first quarter, such loans accounted for more than a third. “Many consumers postpone their Christmas shopping until January because they expect special discounts there,” says Neumann. Corresponding credit campaigns by the trading community further strengthened the trend. The average installment loan in the first half of the year was around 8,000 euros.
Schufa has no data about the interest rates at which banks lend money, said Neumann. In recent weeks there has been repeated criticism from consumer advocates that banks are not passing on the lower capital market interest rates to consumers. So the rates have barely fallen. According to FMH financial advice, the effective annual interest rate for a 10,000 euro loan with a three-year term has been on average close to eight percent for months – even if lower rates are often advertised, to the annoyance of consumer advocates.
So-called residual debt insurance is also an additional source of income for banks. Although they take over the installment payments in the event of unemployment, occupational disability or death, they can quickly increase the actual interest rate by another five percentage points or more. Contrary to the impression given by many bank advisors, additional insurance must not be a prerequisite for a loan agreement.
