Finns continue to take short-term consumer loans

The demand for short-term consumer loans remained brisk through the entire autumn.
      According to a study carried out by the Federation of Finnish Financial Services (FK), the growth in the credit portfolio was 8.8 per cent on the figures for 2007 at the end of last November. In other words the growth rate was equal to that in the previous year.
     
At present, a total of about 1.3 million Finnish citizens of less than 75 years of age have taken out consumer credit loans. The overall portfolio of short-term consumer loans was EUR 12.1 billion at the end of November.
     
The proportion of short-term consumer loans granted by deposit banks increased last year.
      This was a significant change to the development that had continued for several decades, involving the robbing of the market of the banks by various credit cards, hire-purchase plans, and instant loans.
      However, the secured consumer credit loans of banks continue to be the cheapest way to take out a short-term consumer loan.
      Moreover, the interest rates of the new consumer credit loans that are granted by financial institutions have come down, having been on average 5.8 per cent in November 2008, FK reports.
      FK financial officer Ulla Halonen says that this development could have had an impact on the popularity of the consumer credit loans granted by banks.
      ”It is possible that consumers are considering somewhat more carefully what kind of short-term borrowing would be the best”, Halonen estimated.
     
The interest rates of bank overdrafts and credit cards are higher than those of the consumer credit loans granted by banks. The average rate of interest for the new overdrafts granted on bank accounts was 12.3 per cent, according to FK.
      As a result of short terms and small amounts the yearly rates of interest for instant loans - the kind that can be arranged by a simple SMS message - amount to hundreds of per cent.
      According to the study, the number of new instant loans was almost 780,000. On average such a loan was around EUR 190, with a repayment period of 28 days.


Previously in HS International Edition:
  The Latte Calculator (13.1.2009)
  Economic optimism plummets among consumers and industry (2.1.2009)
  Instant SMS loans - the tip of the iceberg of a massive debt problem (16.12.2008)
  Stories of bad debts gone worse leave ninth-graders with much to think about (27.5.2008)
  Failures to pay instant loans increasingly often lead to litigation (28.4.2008)
  Finns in increasing numbers fall into consumer credit debt trap (19.1.2007)

Links:
  Federation of Finnish Financial Services