Today, about 2 million Swedes have some type of consumer loan (for example private loans, car loans, installments, credit card debts, top loans, blank loans or SMS loans). This is a fairly large proportion of the Swedish population considering that one must be 18 years old to even get a loan.
In the last 10 years, the amount of consumer loans in Sweden has increased explosively.
One reason for this is that there has been a change in attitude towards loans and consumption which has led to an increasing number of consumers consuming and paying later. The price for this will be the interest rate and other fees linked to the loans, on top of the purchase price itself.
What do we then take out consumer loans for? We were also curious about this and therefore ordered a survey from YouGov in the summer of 2013 where we asked Swedes if they had ever borrowed money to finance consumption, and if so to what. Here’s how the leaderboard was:
- Purchase of car, 40 percent
- Home renovation, 22 percent
- Financing of other loans, 8 per cent
- Purchase of other vehicle, 6 percent
- Holiday trip, 5 percent
- Renovation of holiday homes, 3 percent
- Purchase of boat, 2 percent
Not unexpectedly, car loans ended up in the first place.
After all, it is not that many people who have a few hundred thousand kroner lying on the savings account to buy a car for. In addition, many car dealerships attract “low interest rates”. What many people do not think about is that the car loan often has expensive fees which makes the total cost of the loan much higher.
However, that as many as 5 percent borrowed money to buy a holiday trip is more surprising. When the holiday is over, both the money and the holiday are spent. Admittedly, you have (hopefully) nice memories, but otherwise the only thing left is the backlash from the loan party.
It may be good to think about now that we are getting closer to vacation times.
Sure it is tempting to be able to go on a wonderful holiday, but keep in mind that it is not as fun to be drawn with a boring loan when the fun is over. It’s always fun to have something to look forward to instead of the other way around, right?