Consumer loans for holidays up 91% in a decade
Spanish consumer credit for holidays hit €16.762 billion between March and June, up 12% and a 20-year high. Who benefits from summer debt?
English · Original discussion in Spanish · Published
Holidays on credit: summer debt up 91% in a decade
Who borrows money to spend two weeks at the beach? More people than you might think. Data from Banco de España (Spain's central bank) confirm that consumer lending between March and June reached €16.762 billion, 12% more than the previous year. It is the highest figure in two decades and 91% above the level of ten years ago; only 2006 and 2007, at the height of the property bubble, were higher.
The inflation excuse
Some defend borrowing as an almost free deal. Financing €3,000 at 12.5% over twelve months costs about €200, and with double-digit inflation the money in the bank loses value month by month. The argument holds up until the fine print appears: overdrafts, fees and then September. Inflation eats into the bank too, but it is not its executives queuing at the supermarket checkout.
Debt as a social tranquilliser
A second reading sees these loans as an attempt to sustain a semblance of normality. The holiday loan would work as a social tranquilliser: paying to look like you can afford it, even though the shopping basket and the rent say otherwise. It would not be poor individual money management, but a snapshot of an entire country living beyond its means while the Euribor settles at uncomfortable levels. Then come the tears, as the cautious would say.
So consumer credit is hitting two-decade highs just as interest rates rise. The banks are delighted; the summer is saved; and September is waiting at the door. Life is but two days, but the debt comes back every year.
Who borrows money to spend two weeks at the beach? More people than you might think. Data from Banco de España (Spain's central bank) confirm that consumer lending between March and June reached €16.762 billion, 12% more than the previous year. It is the highest figure in two decades and 91% above the level of ten years ago; only 2006 and 2007, at the height of the property bubble, were higher.
The inflation excuse
Some defend borrowing as an almost free deal. Financing €3,000 at 12.5% over twelve months costs about €200, and with double-digit inflation the money in the bank loses value month by month. The argument holds up until the fine print appears: overdrafts, fees and then September. Inflation eats into the bank too, but it is not its executives queuing at the supermarket checkout.
Debt as a social tranquilliser
A second reading sees these loans as an attempt to sustain a semblance of normality. The holiday loan would work as a social tranquilliser: paying to look like you can afford it, even though the shopping basket and the rent say otherwise. It would not be poor individual money management, but a snapshot of an entire country living beyond its means while the Euribor settles at uncomfortable levels. Then come the tears, as the cautious would say.
So consumer credit is hitting two-decade highs just as interest rates rise. The banks are delighted; the summer is saved; and September is waiting at the door. Life is but two days, but the debt comes back every year.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (35 replies).
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