For the first time since 2018, the number of over-indebted German citizens has increased again, according to the credit agency Creditreform. There was only a minimal increase from 17,000 people to 5.9 million and thus a share of 8.51 percent of adults, as shown in the “Debtors’ Atlas of Germany 2023”, which the company presented on Wednesday in Neuss. According to the Creditreform experts, this is just a harbinger of a stronger increase in the coming year. “There will be more over-indebtedness,” said the head of Creditreform economic research, Patrik-Ludwig Hantzsch.
Anyone who cannot meet their financial obligations in the long term is considered over-indebted. For its “Debtor Atlas,” Creditreform has been evaluating anonymized data from official registers, online retailers and other sources since 2004.
Since Creditreform changed its methodology, the number of over-indebtedness in the new calculation even fell slightly to 5.65 million. However, if you compare “apples with apples” – that is, if you use the same methodology as in 2022 – the result is an increase of 5.9 million, said expert Hantzsch.
The time of low interest rates is over
The statistics had been declining for years. During Corona times, people became more thrifty and fell into debt less often because there were fewer opportunities to spend money. Low interest rates and government aid, which supported companies and saved jobs, also played a role.
The situation now looks different: the economic outlook is bleak, unemployment is rising and interest rates are rising. For example, anyone who pays off their apartment and needs a new loan will now have to dig much deeper into their pockets than before. In addition, the cost of living remains high. “There are too many crises and the impact on consumers is there,” said economic researcher Hantzsch.
Over-indebtedness among people under 30 is increasing
The debt atlas also provided insight into the reasons why people become financially unbalanced. In 19 percent of cases it is due to unemployment, in 18 percent it is due to illness, addiction or an accident. Separation from a spouse, failed self-employment and uneconomical household management are also decisive factors.
When we look at the age groups, it is clear that the problem of over-indebtedness has worsened among those under 30. This is also due to a fairly new form of installment loans from online payment service providers, which are particularly popular among young people with the slogan “Buy now, pay later”.
Economic researcher Rainer Bovelet sees this as a problem. “The payments won’t be due for six months or a whole year – so it can happen that people lose track.” There had been no increase in over-indebtedness in the under-30 age group for ten years, but now the number has increased again.
Meanwhile, the Federal Working Group for Debt Counseling reported a significant increase in inquiries from people struggling with debt. Creditreform’s forecast that the problem will worsen is viewed with concern. “The non-profit social counseling centers have often been working at their limits for months,” said managing director Ines Moers. Because of the high demand, waiting times at the advice centers are long. She demanded that the state-recognized and free advisory services should be “massively expanded.”
Consumer advocates are campaigning for better protection for people when granting loans so that they don’t get caught up in debt in the first place. “Effective protection against over-indebtedness can only be achieved if lenders have to record the income available for repayment when checking creditworthiness,” said Dorothea Mohn from the Federal Association of Consumer Organizations (vzbv) and also evaluated the “Buy now pay later” offers as a problem. “The federal government needs to tighten up the law here.”
The Creditreform experts are sure that the number of over-indebtedness will increase in the coming year, but they did not want to make a numerical estimate. In 2022 they were quite wrong: they had already forecast an increase back then and described an increase of 600,000 for 2023 as “not unrealistic”.
Now there are only 17,000. “We expected significantly more,” admitted economic researcher Hantzsch. A year ago there was a threat of an energy shortage and people feared extremely high electricity and gas costs. Thanks to government support measures, the situation has not developed so badly.
In addition, more citizens acted financially sensibly than expected. “Many consumers say to themselves that in such uncertain times they neither buy a house or apartment, change a car or make major consumer spending – they hold back because they don’t know what will happen in the future.”
The results of a survey by the credit agency CRIF, also published on Wednesday, also fit into the pessimistic picture that Creditreform painted. 39 percent of Germans expect to have a smaller monthly budget in the coming year. 16 percent of those surveyed said they had to rely on new loans to make ends meet.
