Internal Revolut 2023 July-2024 July data show that family loans accounted for 19 percent of all issued consumer loans. This trend is growing – the total portfolio of consumer loans of Lithuanian families increased by 35% in January-July of this year. A family loan is a consumer loan granted after assessing the total income and liabilities of both spouses.
Families borrow larger sums of money – the average loan during the mentioned period is about 21 thousand. EUR – more than twice as compared to individual borrowers’ loans. Families also tend to choose longer borrowing periods – an average of 7 years (81 months), while individual borrowers choose 5 years. The average monthly payment for a family loan was 310 euros, while individual borrowers paid an average of 174 euros per month.
Financial discipline is a distinguishing feature of Lithuanian families when it comes to consumer loans. In the past year, not a single family loan was delayed for more than 30 days. When the delay is up to 15 days, family loans were delayed 6 times less often than individual borrowers, the data show. Financial discipline leads to more affordable borrowing: over the past year, the median interest rate for family loans was 6.99 percent, the average was 7.5 percent, and 7.99 percent for individual borrowers. and 9.25 percent.
The most common purposes of lending: home repairs and cars
The most common reasons for which Lithuanians borrow remain unchanged: the main reason is home renovation (40 percent of all loans) and car purchase (31 percent). Some families also cite shopping, travel or other purposes as reasons for taking out loans. A less frequent reason for taking a loan among individual borrowers was the purchase of a solar power plant.
When comparing Lithuania with other countries in terms of the purpose of taking a loan, Lithuanians are clearly in the lead in that they give priority to home repairs and renovations. The Irish and the Spanish mostly use the loan to buy a car, less often for shopping and personal expenses, and even less often for refinancing or borrowing for education. The Portuguese and Spanish also use consumer loans to purchase IT equipment. The most common reason given by the Portuguese for a loan is shopping.
A survey of 18 European countries conducted in October by the global data company “Dynata” showed that the most frequently listed reasons for using a consumer loan or credit card in the next few years without home renovations are travel and vacations, investments in health and well-being (sports, medical care) and taking advantage of sales season (Black Friday, Cyber Monday) discounts and preparing for the biggest holidays of the year. Credit cards are more often mentioned as a way to make more expensive purchases (fashion, electronics), to spend leisure time in the city or simply to cover current expenses when the salary is not enough.
Revolut Bank credit department head Darius Klimas draws attention to BVKKMN, the general annual rate of the price of a consumer loan, which includes all costs related to credit. “Comparing this indicator will provide transparency and confidence that you are choosing the best offer,” says D. Klimas. He also points out the additional fees sometimes applied in the market for early repayment of the loan or the complicated early repayment process.
He advises when it is better to choose a consumer loan and when to choose a credit card. “Consumer loans are more favorable for borrowing for a longer period of time and for larger purchases. Credit card interest rates are usually significantly higher than consumer loans, so it is better to choose them when you need to borrow more often, but for a short time,” says D. Klimas. He adds that the credit card limit does not cost anything if it is paid back quickly after use, but it contributes to a person’s overall loan portfolio, so for those planning to take out a home loan, it is advisable to choose a card with a credit limit equal to 1-2 salaries.
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