Debt hits families with instant credit hardest in Lithuania

“For approximately four in five families with instant credit, their financial liabilities are a heavy burden. It is a dangerous tendency that this burden is being assumed by households with the lowest income, whose abilities to deal with unexpected changes in their financial positions are limited,” said Andrius Skarnulis, head of the Macroprudential Analysis Division of the Bank of Lithuania.

According to the survey, approximately one sixth (16.9 percent) of households have financial liabilities. Nearly half of all families with financial liabilities (46.5 percent) used leasing company services and borrowed for consumption expenditure (27.6 percent), one fifth reported to have taken housing loans, and 18.8 percent of families have been issued instant credits. Households with the lowest income are mainly indebted to instant credit companies. 75 percent of families with income below EUR 350 reported being indebted to instant credit companies.

Current financial liabilities were reported to be a heavy burden by 47.1 percent of financially liable households, while 83.9 percent of families with instant credits reported feeling financial burdens. Moreover 71.8 percent of families indebted to instant credit companies did not manage to save anything over the previous half-quarter, the central bank of Lithuania reports.

Overall, about half of the families surveyed managed to save at least a little (45.5 percent), and 45.7 percent of those who managed to save money had put aside between €31 to €150 as savings. Survey participants felt more optimistic about their opportunities to save in the future: there were more households intending to save over the next half-year (61.1 percent of total respondents) than those who had saved over the previous six months.

The most popular means of saving money continued to be liquid financial assets held at home (59.7 percent) and an account or deposit with a bank (54 percent). Other saving means were much less popular: life assurance products were reported to have been chosen by 10.9 percent, pension funds by 6.6 percent, and property investments by 3.7 percent of those surveyed.