Germans have high payment behavior

The historically low unemployment ensures low loan defaults among German consumers. A form of credit is meanwhile becoming more and more important.

The banks praise the high payment behavior of the Germans.

Dhe consumer finance-oriented credit banks are very happy to operate in Germany for a special reason: the high repayment rate of the Germans. As the chairman of the banking association, Jan Wagner, said on Thursday in Frankfurt, around 98 percent of all loans in Germany are properly repaid. According to data from the European Central Bank, 2 percent of loans in Germany are permanently defaulted.

At the credit banks of the banking association, the risks are even lower: the rate of defaulted loans is sometimes less than 1 percent. According to Wagner, the Germans’ high payment behavior ensures a relaxed risk situation. This can be seen in the decline in consumer bankruptcies. Between 2010 and 2017, these fell by 34 percent to 71,896 procedures.

According to Wagner, the repayment rates are only higher in Luxembourg and Finland than in Germany. The proportion of non-performing loans is around 1.5 percent. In comparison, Italy, Ireland and Portugal have double-digit rates. In France it is 3.2 percent and in Spain 4.8 percent.

Online loans are becoming increasingly important

Last year, the credit banks, which come from all pillars of the German banking industry, issued 10 percent more consumer loans. The new commitments amounted to 56.5 billion euros, of which 22.8 billion were for car financing. The historically low unemployment figures had a positive effect on the consumer climate, said Wagner, who retired in December 2017 as CEO of Creditplus Bank, a subsidiary of the French Credit Agricole.

Online loans, which made up 27 percent of installment loans last year, are becoming increasingly important. In 2013 it was 18 percent. The credit banks, which have a market share of 61 percent in installment loans, would like to make it easier for them to conclude loan agreements on the Internet. The written form requirement for consumer credit prevents a simple contract conclusion on the net.

The credit banks refer here to the significantly simpler procedure for installment purchases on the Internet compared to credit. These offer payment service providers who handle payment processing for online retailers. However, the sums involved are significantly lower: installment purchases are rarely more than 1,000 euros, while consumer loans can quickly double or more.

The credit banks are also active in investment finance for companies. Here the new loans even rose by 15 percent to 16.5 billion euros. Motor vehicles also took the lion’s share of the financed objects in commercial business.