2024-09-15 13:00:41
While unemployment dominated for years as the main cause of over-indebtedness, two other causes are now driving more and more people into the debt trap.
Illness and addiction have replaced unemployment as the most common cause of over-indebtedness in Germany. This is the result of the current “Over-indebtedness report” of the Institute for Financial Services (IFF). According to the report, which is based on data from 114 debt counseling centers, health problems will be the most common reason for over-indebtedness in 2023: 18.4 percent of cases can be traced back to this. Job loss is the second most common trigger at 17.5 percent. Other reasons include divorce or separation, low income and consumer behavior.
For the first time in years, unemployment is no longer the main cause of over-indebtedness, which experts attribute to the stable employment situation and demographic developments in Germany.
“We have an employee market, and there is also a shortage of workers and skilled workers in many places. The issue of job losses has therefore steadily lost importance,” said Patrik-Ludwig Hantzsch, head of economic research at Creditreform, which publishes the annual Debtor Atlas.
In terms of types of claims, installment loans are the most common, followed by outstanding debts from public institutions, such as outstanding taxes or claims for repayment of social benefits. “Installment loans in particular play a major role in over-indebtedness in Germany,” explained Hanne Roggemann, one of the authors of the IFF report.
Almost one in five people seeking advice have at least one claim that results from such installment loans. This includes, for example, “buy now, pay later” offers where the bill does not have to be paid until later.
The Federal Association of Consumer Organizations and the IFF warn against such offers due to high late payment interest and reminder fees. They also make it difficult to keep track of things.
According to the “Over-Indebtedness Report”, the average debt (median) of people who visit a debt counseling center is 16,547 euros, which is slightly higher. More than one in three (35 percent) of those seeking advice had debts of less than 10,000 euros, while 42 percent had debts between 10,000 and 40,000 euros. And a good one in five (23 percent) had debts of more than 40,000 euros.
According to Creditreform, around 5.65 million people in Germany were over-indebted in 2023, which corresponds to around one in ten adults. Although the number of over-indebted consumers has continued to decline, it has increased again for the first time since 2013 among those under 30 (+0.4 percent).
The report shows that over-indebtedness is a complex problem that is often linked to other social and economic factors. The level of debt varies greatly, with a large proportion of those affected having debts in the mid-five-figure range.
In total, almost 200,000 consultation cases from the period 2008 to 2023 were evaluated for the non-representative over-indebtedness report, of which almost 24,000 were from last year.