More and more people in Germany are making purchases with “Buy-Now-Pay-Later” loans – according to data released on Tuesday by SCHUFA, a major credit information provider in Germany.
Now almost every second newly issued instalment loan is for less than €1,000 ($1,064), according to the latest SCHUFA data.
In 2023, the credit agency, based in Wiesbaden outside Frankfurt, recorded 4.35 million new contracts in this category. This is approximately 14% more than in 2022.
Buying on credit is enticing for consumers especially since the financing is often advertised as interest-free, explained SCHUFA board member Ole Schröder. He added more middle-aged consumers are making purchases this way.
Previously, small loans were primarily popular among younger people, according the data. But with the increase in online retailing, demand from middle-aged consumers has grown. The number of ongoing instalment loans under €1,000 among those aged 35 to 39, 40 to 44, and 45 to 49 increased by around 30% in 2023 over 2022, the credit agency said in its Risk and Credit Compass report.
For years Germany has been viewed by many outside of the country as an especially frugal place, where purchasing anything on credit is frowned upon. Many families have stories about their relatives in the 1950s, when the country was rebuilding after World War II, and how they stretched food, clothes and other items – because money was tight.
Decline in larger financings
While that has changed, SCHUFA did report more reluctance to take on loans over €1,000. Last year there were roughly 4.84 million new contracts in this category, or about 8% less than in 2022. Many consumers have held back on larger purchases due to the spike in inflation. Additionally, following the European Central Bank’s interest rate hike last year, instalment loans became significantly more expensive then.
Overall, the number of newly concluded instalment loan contracts in Germany increased slightly from 2022 to 2023 by nearly 1% to almost 9.2 million. Together with existing contracts, banks had extended over 19 million instalment loans to consumers at the time of the survey.
Germans pay back their loans
People in Germany are good debtors, the data showed, with 98.1% paying off their loans, SCHUFA said. The proportion of contracts with repayment issues has decreased from 2.1% to 1.9% within a year.
“Despite all the crises in recent years: The credit system in Germany is stable,” assessed Schröder. However, the number of people experiencing repayment issues for the first time has increased. “This is not a good development,” the SCHUFA board member warned.