The end of the shutdown and the recovery of activity at all levels has brought with it an increase in energy costs that should have been temporary at first. However, nothing can be further from the truth, because the escalation of both electricity and gas, which was dragged along by the war in Ukraine, and fuels added, brought with it another problem. general increase in prices which is starting to leave a mark on the economy of many households. Many low-income families, overwhelmed by the inflation crisis, have no other way out. resorting to debt for simple problems like buying certain items or enjoying a summer vacation. Reflecting this worrying situation is the remarkable increase in consumer loans reaching 21% and the use of controversial “revolving” cards.
It was clear that the current runaway inflation scenario, where wages are far from rising at the same rate as prices, would sooner or later have negative consequences for family economies. And the first alarm signals began to come from the financial sector, which has been seen in recent months. consumer loan portfolio on the rise.
The latest figures from the Bank of Spain show that in June, just before the holidays, the balance of such loans €188 billion, 5% more than at the beginning of the year, showing that many families resort to this type of operation to make a trip or book a hotel stay. However, there are other indicators such as 23,100 million new retail loans in the first half of the year and the purchase of non-real estate assets, which is 3% more than in the same period. last year.
There is another factor pointing in the same direction. increased use of so-called “revolving” cards, a controversial financial product with deferred payments that allows installments to be paid regardless of whether the account has funds or not. Also in June, 11,419 million euros were reached, the highest level since 2020.
More issuance of loans is a general note among different banking institutions, albeit at different percentages. Thus, in the case of CaixaBank, consumer finance production in Spain’s first half rose 21% year-on-year to €5,142 million.
In Sabadell, on the other hand, it reached 805 million with an 11% growth in the same period. Bank sources point out that the increase also affected other financial products such as mortgages and cards. risk concession criteria prudentIt is based on the fact that they have to maintain the function of stimulating the economy while preserving the health of internal balances. In this sense, they explain that loans and payments are supported by savings accumulated by customers.
They did not provide specific data on consumer loans from Santander, but point out that they are growing above double digits. However, in the last financial report of the company, it was underlined that the increase in fuel prices and inflation created uncertainty, reducing the disposable income of customers and families using borrowing as a tool. pillow to deal with price increases.
Increase in default by financial companies
The default rate among consumer finance companies committed to lending has exceeded 7%, a rate that has not been reached in the last six years.
This fact indicates that these types of loans are the first to default, as there is no asset to respond to possible defaults, as is the case with residential mortgages. It also shows that families find it more difficult to repay the amounts received.
Warning against the risk of over-indebtedness
The Consumers Union, in its delegation in Alicante, warned of the serious risks of over-indebtedness posed by consumer loans and “revolving” cards, which it recommends obtaining adequate information about the financial products subject to the contract and making it realistic. possibilities of every family.
The organization’s treasurer, Sigfrido Ortiz, notes that “there is an alarming lack of financial education among consumers, which encourages them to ignore the potential negative effects of loans and cards and to take the risk of over-indebtedness and resulting in a crisis.” defaults file».
Ortiz recommends giving up on them outright, especially with regard to “rolling” cards. “The people who hire them are in danger of falling into a cycle where they can never stop paying because they will have to pay more and more capital and interest,” he says.
Therefore, the Consumer Union representative advises families to “adjust to what each can afford, buy and plan vacations to avoid big consumer loan deals,” taking into account the current scenario of rising inflation. Prices continue to rise today and we may find ourselves with adverse operating situations.