Expert explains growth in personal loans

The share of loans Russians took out to cover their unforeseen immediate expenses surged to 19.9% of all loans approved in March, against 15.5% in February, TASS reported citing Webbankir online financial platform.

According to Svetlana Samoilova, a financial expert and co-founder of the Finliberty school of independent financial consultants, consumer loans and loans from MFIs showed the same trend in the first and second quarters of 2020, during a high-pressure phase of the pandemic in Russia when employers laid off staff and cut their wages due to lockdowns.

Similar factors are influencing the market today – Western sanctions, a sharp devaluation of the ruble with inflation doubling in a month (from 8.5% at the end of February to 16.6% at the end of March on an annualized basis), and expectations of shortages of goods. The pressure has predictably made people make some rush purchases or worry about the possible loss of work, the expert explains.

“People panicked and spent more money than they could afford (on long-term foods, household appliances and electronics). They obviously needed to do something to bridge the cash gaps in their family budgets. Hence, the surge in multi-purpose loans people had to use to cover their unforeseen expenses and immediate needs,” Svetlana Samoilova notes.

However, she believes the situation has somewhat stabilized, both in the foreign exchange market and in terms of employment.

“If this trend persists in the future though, it should definitely cause concern – it will mean that quite many people are no longer able to keep up with their current credit burden, struggling to pay for necessities. This will indicate that the majority of Russians are in a difficult financial situation. So far, however, there are no reasons for a sharp deterioration in people’s living standards. The panic peak has passed, and let’s hope it will not happen again,” the expert concludes.

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