As economies emerge from shutdowns and activity accelerates across all sectors, households are facing higher energy bills that were expected to be temporary but have persisted. The surge in electricity and gas costs, driven in part by the conflict in Ukraine, along with increased fuel prices, has sparked a broad rise in prices that is making life harder for many families. Low-income households are especially affected, with inflation squeezing budgets and pushing some to borrow to cover everyday needs or to fund leisure like a summer trip. A visible sign of this strain is the notable growth in consumer lending reaching levels around 21 percent and a greater reliance on revolving credit cards that carry deferred payment terms, sometimes without regard to sufficient funds in the account.
Analysts observe that the current inflationary path, where wages fail to keep pace with rising prices, will sooner or later impact household finances. The first warnings have appeared in the financial sector, where there has been a lift in the demand for consumer loans in recent months. Consumers increasingly turn to these loans to manage holidays, hotel stays, or other discretionary spending, reflecting a broader need to smooth consumption amid price pressures.
Recent data from the Bank of Spain reveal that in June, just before the holiday period, the outstanding balance of consumer loans stood at €188 billion, up 5 percent from the start of the year. This growth indicates that many households rely on such financing to fund travel and other experiences. In the same timeframe, there were around 23,100 million euros in new non-real estate retail lending in the first half of the year, a figure about 3 percent higher than in the previous year. These indicators point to sustained demand for financing tied to everyday purchases and non-property assets.
Additionally, the use of revolving cards—credit products that allow ongoing installments irrespective of current funds—has surged. In June, the outstanding balance on revolving credit reached approximately €11,419 million, the highest level seen since 2020. This trend highlights how some households rely on flexible repayment structures to manage price increases, even when budget constraints are tight.
Across banking institutions, loan issuance has risen, albeit at different rates. CaixaBank, for example, reported a 21 percent year-on-year increase in consumer finance production for the first half of the year, reaching €5,142 million. Sabadell showed an 11 percent rise in the same period, with consumer finance reaching €805 million. Bank insiders note that the strength in consumer loans is accompanied by growing demand for other credit products, including mortgages and payment cards. Risk-conscious lenders assert that the appetite for credit must be balanced with prudent underwriting to sustain economic momentum while protecting household balance sheets. In this view, loan approvals are supported by customers’ savings, which helps maintain financial health even as borrowing grows.
While Santander’s exact consumer loan figures were not disclosed, officials indicated double-digit growth in lending overall. Nevertheless, the latest financial report stresses that higher fuel costs and persistent inflation have reduced disposable income for many households, making borrowing a tool to cushion the impact of price increases rather than a long-term solution.
Rising defaults in consumer finance
The rate of default among consumer finance lenders has climbed above seven percent, a level not seen in the last six years. This trend suggests that unsecured loans are the first to falter when household finances tighten, as there is no collateral to absorb losses in the event of missed payments. It also signals growing difficulty for families in keeping up with repayment obligations as costs stay elevated.
Concerns about over-indebtedness have prompted warnings from consumer advocates. The Consumers Union, operating through its Alicante delegation, cautions about the serious risks tied to consumer loans and revolving cards. They urge shoppers to seek clear, accurate information about the financial products they contract and to align borrowing with realistic household budgets. The group emphasizes the need for better financial literacy among consumers to prevent a cycle of escalating debt and eventual financial distress. The treasurer of the organization notes a worrying gap in financial education, which can lead people to underestimate the potential negative effects of loans and cards and to take on debt that becomes difficult to manage.
Experts advise avoiding revolving credit whenever possible, especially for those who might fall into a cycle of increasing capital and interest payments. Instead, families should aim to live within their means, plan purchases and vacations with care, and consider rising inflation when budgeting. The guidance is clear: adjust expectations to what can be comfortably afforded and resist the temptation to enter large consumer loan agreements during this period of price volatility. The overarching message is to plan prudently to navigate a landscape where prices continue to trend upward and financial pressures remain a daily reality for many households.