Wednesday, December 11, 2019

Installment loans are interesting for high earners

Married couple show something on a tablet by a consultant - CreditPlus Credit Magazine

Not only low-income consumers use installment loans when planning a larger purchase. 

As a recent study by the Duresearch Institute (DI) on behalf of the Paleoband Show shows, this form of financing is also used by high earners with a monthly net income of more than 2,500 euros.

One in three households uses loans – including good earners

More than 1,800 Germans were interviewed for the representative survey, of which one third stated that their household had one or more installment loans. Of the borrowers, 31 percent are singles, 41 percent are families without children, and 28 percent are families with children. The credit users come from very different income classes: 22 percent have a net household income of less than 1,500 euros a month, with 34 percent of the income between 1,500 and 2,500 euros. But even well-earners have current loans: 29 percent earn between 2,500 and 3,500 euros and at 15 percent, the monthly net income of the household over 3,500 euros. It turns out that even high-income people often choose installment loans to finance their purchases. As explained by the banking association, it is interesting for high earners that they maintain their liquidity through a loan and are only burdened by the installment payments to a minimum. The average monthly rate that credit users pay is 250 euros.

Installment loans usually finance the purchase of a car

Most borrowers use the finance to buy a car. 33 percent of installment loans are used to finance a used car and 26 percent are for a new car. 17 percent of those surveyed purchased furniture or consumer electronics with the loan. Even large household appliances are still popular with 14 percent. In each case, 13 percent have not taken their credit for an acquisition, but to recapitalize older loans or to offset their bad debts.

Borrowing on the internet is becoming more popular

The survey also shows that 25 percent of installment loans are now being completed online, compared to 21 percent in 2015. Consumers are particularly likely to choose to borrow on the Internet if they want to finance consumer electronics or large household appliances. Forty-seven percent of the loans went to a bank, and 25 percent to a car dealer. Even with purchases in the retail or mail order, many customers opted for the possibility of a loan: 23 percent of financing run at such companies.

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