Financial experts commented on how inflation affected the consumer loan market

Inflation has increased a lot in the last couple of years, reaching around 5% in Q1 2022 in the entire European Union. Various countries have even indicated higher rates, going up to 7%, including countries like Spain and Sweden. This has been determined by the high boost in costs of electricity and gas. The thing is that since the beginning of 2022, the rates for energy were not down from the previous year. And that is why the demand for consumer loans has been higher than in previous years. Given the fact that the prices are still going up instead of the opposite, it is obvious that the demand for the loans will still be high till the end of the year.

Inflation affects the consumer credit market

Skyrocketing costs have triggered protests in some countries as helpless groups of people were highly affected from inflation and called on governments to take steps to defend them. In this topic, it is important to comprehend who is most affected. Many establishments have started to make loan overviews to see how the issue can be solved as people started to apply for consumer loans even more than the year before. Many lending companies such as Thorn, have changed their interest rates on special consumer loans for people to have more convenience and security in the process of the application. Experts have noticed that with the implementation of such changes, the interest for consumer loans has increased by 20%, and the confirmed applications almost doubled.

According to a survey done by analysts at various organizations, Europeans apply for consumer loans to manage their monthly expenses. This fact was very common in 2020 when the Pandemic started. However, the interest got lower and lower as the Covid-19 started to slowly wind down. People assumed that everything was over and they would get back to their normal lives. However, the boosts in the client demand and expenses of client goods have directed to inflation in the entire European Union. This has caused more demand for consumer credit so that people could have more freedom in their day-to-day expenses. And many analysts predict that these numbers will steadily increase in the forthcoming few years as the situation around the world does not promise better circumstances. 

Even though many specialists say that this period is not for a very long time, inflation still touches the budget of the poorer part of the population since they don’t have enough savings to handle the consumption. Or, there are times when people save their money in cash or banks with very low rates, which is not a secure way for inflation. According to recent studies by analysts, around 68% of people who applied for consumer loans do not have enough savings to keep up with the increased rates. That is why they apply for loans to have money for their expenses. Apart from the increase in energy prices, many other factors affect inflation and the high demand for consumer loans. International flight tickets have increased by over 9%, and the prices of consumer goods have raised by 3% since 2021. Which conducted to the growth of the costs in the basket of consumer goods by around 5%. And this is how experts explain the fact that low-income homes have a higher influence from inflation than high-income ones. Recent studies have shown that low-income families apply for loans almost three times more than the ones with higher earnings. And almost 86% of people get confirmation from banks and lending companies. 

The bottom line

This topic can be something to discuss for a very long time since experts notice huge inflation rates followed by demands for consumer loans. With this kind of increase in the consumer market, people start to apply for consumer loans to manage their expenses. This loop will be repeated with every change in inflation, and many lending companies and banks will start to modify their interest rates to meet their customers’ expectations and get more applications. Experts predict further raises in the consumer market prices, which will surely have a huge impact on consumer credit. As we are almost finished with 2022, the final year statistics will be available at the end of the year.


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