Joblessness Ceasing to Be the Primary Reason for Financial Obligations Beyond Capability
Unemployment used to be synonymous with poverty and financial struggles. This link persisted for quite some time. However, as per recent expert analyses, the primary factors causing consumers' payment troubles have shifted.
In Germany, illness and addiction have surpassed unemployment as the primary reasons for debt issues. This information comes from the "Over-indebtedness Report 2024" published by the Institute of Financial Services (IFF), as reported by Welt. In 2023, 18.4% of cases were due to health problems, while job loss accounted for 17.5%. Divorce/separation, low income, and personal spending habits followed as reasons.
Experts believe this shift is a result of Germany's robust employment market and demographic transitions. "We have a job market with a shortage of skilled workers and jobs, making job loss less of a concern," said Patrik-Ludwig Hantzsch, head of economic research at credit agency Creditreform.
Regarding types of debt, installment loans take the lead, followed by unpaid debts to government bodies, such as unpaid taxes or social benefit claims. "Installment loans play a significant role in debt issues in Germany," said Hanne Roggemann, one of the authors of the IFF report.
Caution against "Buy Now, Pay Later" deals
Nearly 20% of individuals seeking advice have at least one debt stemming from installment loans, including "Buy Now, Pay Later" offers. The Federal Association of Consumer Organizations and the IFF advise against these schemes due to high late fees and confusion about terms. The non-representative over-indebtedness report analyzed approximately 200,000 counseling cases from 2008 to 2023, with nearly 24,000 from the last year.
Despite the shift in primary reasons for payment troubles, unemployment still poses financial challenges for many. In contrast to Germany, where unemployment is not the leading cause of debt issues, unemployment can lead to financial hardships in other countries.
The 'Buy Now, Pay Later' deals, while popular, can exacerbate debt problems for individuals facing unemployment or other financial struggles, making it essential to exercise caution when using these services.
