THE RELATION of Slovaks with consumer loans has changed over the last five years as an increasing number of people are willing to borrow money, not only to perhaps replace a broken appliance, but also to obtain goods or services just for pleasure. This is also proven by the fast growth of consumer loans in terms of their volume as well as the overall number over the last five years.
“The relatively fast and high growth is a consequence of impacts from several factors,” said Zdenko Štefanides, chief economist with VÚB bank, adding that while in 2010 impacts of the financial crisis were just fading away; now the situation is different. “The labour market is stabilised and people are not afraid to start taking loans.”
In terms of the volume of consumer loans, Slovakia has registered an increase of 50 percent when comparing 2010 and 2015, which is the biggest growth in the eurozone. Štefanides sees also a low comparison base behind this development when the volume of consumer loans per capita was €557 in Slovakia in 2010 and increased to €830 in 2015, based on data of the European Central Bank. During the monitored period the average gross wage increased 15 percent from €769 to €882.
The ratio of the total indebtedness of households, which includes also mortgage loans, leasing contracts and other loans compared to household disposable incomes increased by 16 percentage points from 39 percent to 55 percent. In this respect Andrej Arady, analyst with VÚB, said that in Slovakia, with respect to the current development of the economy and remuneration, there is space for growth to a ratio of about 60 percent, while this might be achieved within the next two years. In general this ratio approaches 100 percent in the EU.
Changing attitude to consumer loans
The attitude of Slovaks to consumer loans is changing as they are now more prone to take a loan not only for an emergency situation for which they have not saved a financial reserve, but also for pleasing purchases.
“They perceive the loan as a common part of their lives which helps them to get what they want without waiting,” said Angelika Farkašová from VÚB. “It does not inevitably need to be something that they need, but more frequently it is also a holiday or a present by which they want to please their relatives or friends.”
However, the most common purpose for taking a loan is still equipping households or small reconstructions. These days also financing of shopping and holidays is more common, according to an online survey conducted by United Consultants. Moreover, while those who have not yet taken any loan are rather conservative and cautious to do so, those who have already taken such a loan are prone to borrow money again.
The survey also showed that people are more disciplined in settlement of loans, but also more demanding. The latter is also a response to the latest development on the Slovak loan market when local interest rates have decreased considerably and thus supported clients leaving their bank for another one offering better loan conditions.
“The clients do not expect only an advantageous rate from a loan but also something above this,” said Farkašová, adding that VÚB has responded to this with bonuses to loyal clients settling their loans on time.
