Rising prices cause an explosion in consumer credit .. Should we be concerned?

Rising prices cause an explosion in consumer credit .. Should we be concerned?

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The number of French households receiving consumer credit increased by 8.8% over the past year. A solution based in the face of high prices. Should we be worried?

The end of the month is getting tougher for some French. Full of gas, shopping cart, energy bill.. the prices went up against the background of the war in Ukraine. The average extra cost was estimated at €90 per month on average, according to a study of 60 million consumers. The only solution for these Frenchies: Plunge into their savings or take out a consumer credit.

This is proven by the latest figures released by the Association of Corporate Finance (ASF). In the first quarter of 2022, the production of new consumer loans jumped 8.8% compared to the same period last year. The size of this market is 11.8 billion euros. In detail, personal loans jumped 16.1% in one year, representing a volume of 3.5 billion euros.

Daily cash financing

If spring has traditionally been a boom period for consumer credit, microcredit has risen sharply this year, notes consumer credit broker Empruntis. “We can imagine a natural consequence of inflation because we have a significant increase in the volume of loans below 2,000 euros. In March-April-May 2022 we have an increase of 40% compared to January-February 2022. For credits from 2,000 to 5,000 euros, the increase ranges from 25 to 28%” Send Celine Rockellor, Director of Studies. “These loans under €2,000 are one-time cash solutions. Families use this type of financing because they are experiencing temporary financial difficulties or because they no longer have savings to fund the daily cash or to change a broken washing machine, for example.”

As in real estate, consumer credit rates are rising. They have increased by 0.6 to 0.8 points per month since the beginning of the year. Over 12 months, for a consumer loan of less than 2,000 euros, the rates vary from 2% to … 11% depending on the profile of the borrower!

Pascal Hebel, associate director of C-ways and consumer expert, is concerned about this. “We feel that purchasing power is starting to decline. Some French people have gas or electricity bills to pay, and some can no longer buy food as of the 15th and can only do so by taking out a loan. This is a sign of concern, particularly in the regions rural areas where the energy weight is high.” With one fear: the continued rise in interest rates “with the risk of entering an infernal spiral of over-indebtedness,” explains Pascal Hebel.

No increase in excess debt

However, these increases in consumer credit do not translate into an increase in over-indebtedness. At the end of April 2022, the Bank of France scale recorded 39,113 cases of over-indebtedness compared to 44,703 cases in the previous year, a decrease of 13%. On the other hand, more people were registered in the national file of personal loan repayment accidents: 252,929 people were registered at the end of April 2022, an increase of 14% over one year.

Personal consumer loans should be taken with caution. “If you’re a cash-strapped family, and you have to turn to consumer credit to meet the end of the month, you don’t have to worry about that because it’s not a permanent solution. Credit is not a cash management tool,” says Céline Roquelure of Empruntis.

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