The cheapest consumer loans are around 5%, although, in order to benefit from this interest, the entities demand to be linked by hiring numerous other products, such as cards, insurance, and domiciliary payroll and several receipts
There are many families who currently decide to go on a trip or make reforms in their home by hiring a personal loan … The high rate of consumption of Spanish households, which has been growing at rates of 4% in the last five years, makes many people have opted for the philosophy of living at full speed, many times to the limit of their possibilities.
More flexible consumer loans
In this scenario, consumer finance acquires a very important role, which has grown at rates above two digits in the last three years. In 2006 alone, financial institutions granted loans worth 81,000 million dollars, which is 14.7% more than in the previous year.
Now that the mortgage business is starting to slow down, there are many entities that have announced that they will pay more attention to their consumer loan business.
In general, although interest rates have risen, banks and savings banks are making it easier to grant this type of personal credit. Extending financing periods or introducing grace periods are some of the facilities that include many of the new loans.
A product that interests
The consumer credit market (credits that allow the financing of consumer goods such as vehicles, travel, household appliances …) has been driven in recent years by an environment of the favorable economic situation, low-interest rates and the great dynamism of spending in household consumption.
Currently, although interest rates have risen and, in general, loans are somewhat more expensive, the slowdown in the mortgage business is moving many financial institutions to improve the conditions of their consumer finance products. Philippe Fevre, responsible for assets of Fine Bank Spain, says that the personal loan segment is today one of the most interesting for entities.
“More and more people finance their travels, their reforms at home, technological whims such as plasma televisions … It is an attitude that is gaining ground in Spain,” he says. Salvador Maldonado, director of external relations and studies of Agree Bank, believes, in addition, that consumption will remain ‘strong’, so he hopes that this business will continue to offer interesting results also in 2007. “We estimate that consumer credit will grow at rates between 14% and 14.5% in 2007, “adds Maldonado.
With this scenario of rate hikes, high consumption, and economic slowdown, entities are striving to introduce peculiarities to their consumer loans. They want to include exclusive advantages that make their products flexible so that they meet the needs of customers.
A report by the Bank of Spain states that at least ten entities relaxed in the fourth quarter of 2006 the conditions applied to their loans to household consumption, while, on the contrary, they tightened the criteria for approval of new mortgages.
From the consultant Good Finance they assure that the moderation of the private consumption and the rise of the interest rates configure a scenario in the short and medium-term in which a slight deceleration of the growth rate of the new investment in consumer credit is foreseeable.
“However, the growing need for liquidity on the part of families will compensate for the impact of the rise in interest rates in the demand for consumer loans, causing greater pressure on entities to make the repayment terms of the loans more flexible,” add.