FINANCE, Interviews

Alexander Abramov: Giving 60% of income on loans is a step towards a financial abyss

According to the portal, today the average total cost of a loan is at around 40.8%. Alexander Abramov, head of the RANEPA financial markets analysis laboratory, told Invest-Foresight what to look for when borrowing from credit institutions and how realistic it is not to get more leveraged at all.

– From January 21, financial institutions are obliged to indicate the full cost of the loan next to the interest rate, however, not wanting to scare away customers, banks report this somewhere on the sidelines or on individual tabs. Do you think there will be fewer borrowers?

– First of all, I believe that the indicated 40% is still a somewhat “big” amount…

– Why?

– First of all, because we need to see what specific loans were meant and who was asked. A lot depends on the specific borrower, on the maturity of the loan, on the mass of other parameters. But in principle, if the total cost of a loan for a certain number of people is close to this mark, then I think that indicating this figure in one specific place will still limit the number of people wishing to take out a loan.

– Will they be scared?

– Marketing everywhere and always works like this: so that a person always has the impression that a loan is real for him, that interest and other payments will be small. If you clearly show him the final amount, the result is almost obvious.

– Russians in general are accustomed to live “now”, get more leveraged or this is due to a decrease in the purchasing power of the population? What factor is more important?

– The volume of lending to the population with such rates that appear on the market now has nevertheless decreased slightly, this is a fact. However, it seems to me that people borrow at high rates more due to hopelessness and low incomes, than because of the habit of living “here and now”. Yes, they strive to buy something on credit, but this is not because they cannot live without a specific thing, but because they cannot save up for it or buy it right away.

In general, citizens still began to treat their loan obligations more responsibly, realizing that late payments, for example, affect negatively their credit history, that the loan must correlate with their own income. And of course, despite the fact that now real incomes of the population have begun to grow a little, there is still no serious growth, it is moderate, people have become much more cautious about new loans, trying to keep their own financial security at an adequate level.

– What should you pay attention to when borrowing from a bank first of all?

– First of all, you need to draw up your own “sobering” document for yourself: a payment schedule showing how much you will spend on servicing the loan per month and how much money you will have after all the mandatory monthly expenses.

This schedule will affect psychology best. In general, before taking a loan, you need to compare the rates on it, different costs – with the help of specialized sites that are on the Internet today. You need to understand that you should not borrow money from the first bank that came your way, you need to compare.

I repeat – it is important to compare with your own income. It is believed that if you give 60% of your own income to loan payments, then you are already on the verge of a “financial abyss”, but still acceptable. This is an officially recognized position.

– What about other mandatory payments?

– Indeed! As it seems to me personally, if a person gives just about 30% for loan payments, this is already very sensitive for his personal financial budget. We need to look at these indicators very seriously and assess our own financial capabilities very soberly, including for the future. Moreover, many loans today are not taken for a couple of months, but for a long time.

– President Vladimir Putin approved amendments to legislation that will allow citizens to establish a self-ban on issuing loans from March 1, 2025. Do you think this will help Russians take a more responsible attitude to borrowing money, or will this measure potentially affect only fraudulent loans?

– This measure, this tool is still more aimed at protecting citizens from financial fraudsters. On those who are financially, as they say, enlightened and want to protect themselves additionally from possible risks in this area. In general, this measure is unlikely to affect the population in terms of reducing the number of loans taken – we mentally, not only Russians, but people in general, are not used to limiting ourselves in something seriously.

– Along with the increase in the debt load of the population, the debt burden is also growing, more than ten million people may fall into the risk zone for the fulfillment of debt obligations. Is there a panacea that is convenient for everyone: so that both wolf banks are full and sheep borrowers are intact?

– There are things and situations when this line, which is very thin, is crossed. It seems to me that much depends on the internal mood of the leading banks in the market. They best feel and assess the degree of risk that people place on themselves when deciding to take out a loan.

Therefore, it is more important for them that there is stability in the market. And some kind of “penny” margin that can be earned on the borrower is important in the second place. And therefore, I believe that this ratio is regulated in large banks by internal standards for issuing loans: under what conditions you will be given money, what level of income will allow you to issue a loan, what age you are, what kind of work you have, and so on.

So this is a matter of fine-tuning the “personal” setting. The central bank can control this situation and really affect it only when it already crosses certain dangerous boundaries. But as process management, the risk management standard of large lenders should be at the forefront.

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