Life in debt bondage: the number of Russians with 3-5 loans is named

Over the past two years, the share of bank clients who have five or more loans has almost doubled. From 4.7% in 2021 to 8.6% at the end of 2023. This data is provided by the Scoring Bureau. The sheer number of such borrowers, like a snowball, began to increase in 2019. In 2022, only 49% of bank clients had one loan, and more than half became, one might say, professional borrowers. They go to the bank as if they were going to work, getting themselves more and more loans. Mainly in order to extinguish the previous ones. Sooner or later, such a financial pyramid risks collapsing.

According to the Scoring Bureau, over 25% of borrowers have more than 3 loans. And 8.6% are paying off five or more bank loans. In general, the debt burden of the population is growing, but this, according to researchers, has not yet led to a surge in overdue payments.

And late payments do not particularly increase for the reason that borrowers, as a rule, manage to repay the first loan with the second, the second with the third, and so on.

It would seem that the dry reporting figures themselves mean little to law-abiding Russians. Just think, someone there collected loans… But if your work team has, for example, 20 bank clients, then at least five of them pay off three or more loans. It is clear that they do not advertise this financial feature of theirs; there is nothing to be proud of here. But it turns out that a significant number of Russians are entangled in bank debts. And this problem is already widespread.

Experts argue that the increase in the population’s debt load, to a certain extent, signals the accumulation of risks in the retail loan segment. However, this does not mean a literal increase in bad debts. And they predict that this year the share of overdue debts will be a non-hazardous 3-4%.

Although during the period from January to September last year the number of defaulters increased by 22%. The Central Bank considers the debt burden of citizens to be one of the main risks to financial stability in general.

In general, for the banking sector, perhaps the share of risk is indeed “within acceptable limits”. And for borrowers who can’t get out of loans? The question is rhetorical.

According to Candidate of Economic Sciences and financial analyst Mikhail Belyaev, data on a noticeable increase in people with 3-5 or more loans “on their necks” does not indicate anything good. In any case, the increase in the number of loans means that Russians are using them to try to solve their everyday problems, for which they do not have enough of their own salaries.

“In most cases, these are not the loans that people take to meet their life needs,” he says. – Each subsequent one is issued against the payment of the previous one, and, as a rule, under more difficult conditions. More and more funds are spent on the monthly payment of interest and the loan itself, and accordingly less and less remains for current needs. This is how they end up in credit bondage, in a debt trap. But this situation cannot continue indefinitely.

– You borrow other people’s money and give away your own. Not all Russians understand this?

– So what to do? People are accustomed to living in the same conditions, not taking into account real inflation and rising prices. They cannot or do not want to give up their living standards and bring increased expenses into line with decreased income. The more loans a borrower has, the more difficult it is for him to service them

– Does this story affect banking structures or can only their clients suffer?

– Banks are at risk that their arrears in loan payments will increase. This will worsen their indicators on which they report to the Central Bank. They may be subject to supervisory measures. And this is the first step towards revoking the license.

– But it is believed that the 3-4% delay predicted for this year is not at all dangerous…

– In economics, all figures require additional study. Yes, these 3-4% do not cause alarm. But they fall on the bulk of borrowers who are unable to pay. It’s like the average salary. Someone receives 100 thousand rubles a month, someone – 20. But on average it turns out to be 60 thousand. However, the first one lives well, and the second one lives poorly, and it is he who, as a rule, applies for a loan. What does this figure of 3-4% consist of? Of those who have no debts at all, no arrears and those who are unable to pay it. Here you need to look at individual categories of the population and borrowers.