Rising costs of housing, energy and everyday living have worsened consumers' financial situation in Germany, with the number of people struggling with excessive debt increasing. The number of overindebted adults rose by 4.1 per cent to 7.36 million over the past twelve months, credit reference agency Creditreform announced on Thursday. This means that 10.58 per cent of adults in Germany are now considered overindebted.
In addition to the sharp increase in consumer costs, the gloomy labour market situation is also contributing to financial difficulties, explained Patrik-Ludwig Hantzsch, Head of Economic Research at Creditreform. "Unemployment is becoming an issue again. In particular, large numbers of well-paid jobs in the manufacturing sector have been cut in recent months."
The growing financial pressure is initially reflected in pre-court debt collection measures, Hantzsch explained. Consumers fall behind on their bills, followed by payment reminders and debt collection proceedings. "That is often the starting point of private overindebtedness." When legal measures such as enforcement proceedings or the seizure of claims are added, the overindebtedness becomes further entrenched.
According to Creditreform, people in the middle of their working lives are now particularly affected by overindebtedness. Around 17 per cent of people aged 30 to 39 and approximately 16 per cent of those aged 40 to 49 show signs of overindebtedness, according to the agency.
However, overindebtedness has increased at an above-average rate among young adults under the age of 30. The number of people affected rose by 5.8 per cent over the past twelve months to almost 1.2 million.
"In this age group, overindebtedness is still frequently associated with less severe indicators of overindebtedness. Around one-third of overindebted individuals in this age group initially show early-stage signs of financial distress, such as an ongoing debt collection procedure," Hantzsch explained. Overindebtedness among young adults is often characterised by excessive consumer spending.
Hantzsch criticised "Buy Now, Pay Later" offers and online instalment purchases. Such payment models can make it difficult for consumers to keep track of their financial obligations and can quickly lead to overindebtedness confirmed through legal proceedings.
Creditreform expects the number of overindebted consumers to continue increasing. "Risks such as unemployment, rising living costs and the growing use of credit to finance consumption are likely to shape the development of overindebtedness in the coming year as well."
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