More and more people in Germany are taking out instalment loans – increasingly for smaller purchases too. As the credit agency Schufa announced on Tuesday, the number of new instalment loans rose to over ten million for the first time last year, with half of them remaining below the sum of €1,000. Schufa warned of the potential risk of over-indebtedness due to too many small loans at the same time – including offers such as “buy now, pay later.”
According to Schufa, the number of new installment loans has risen steadily over the past five years – from just under 6.7 million in 2020 to slightly more than ten million at the end of 2024. This increase is mainly due to the strong growth in small loans under €1,000, the credit agency explained. In 2020, their share was still around 20 percent.
The increase in new loans is also leading to more outstanding loans: their number rose from 17.6 million in 2020 to 19.6 million in 2024, Schufa added. The number of small loans among them nearly tripled during this period, from 1.3 million to 3.8 million. “This sharp increase in current small loans underscores the potential risk of over-indebtedness due to too many small loans, such as buy-now-pay-later,” explained Ole Schröder from the Schufa board of directors. “Consumers lose track of their monthly installments more easily and thus their total debt burden.”
With the “buy now, pay later” payment method, consumers can pay the bill for their purchases – mostly made online – later and/or in installments. This payment method is usually offered by specialized payment service providers who work with online shops. The payment is therefore usually processed by third parties and not by the seller itself.
The Federal Financial Supervisory Authority (Bafin) points out that, in contrast to the traditional payment methods “purchase on account” and “installment purchase,” it is possible to split even smaller invoice amounts than usual into several installments and not have to apply for credit. At the same time, however, this payment method can also become a “debt trap.”
This is because some “buy now, pay later” financing arrangements, especially for amounts under €200, are currently still exempt from certain regulations – such as a credit check on the person using the payment model. “What may sound like an advantage is in fact a disadvantage,” explains Bafin on its website. This is because consumers “who use such credit-based payment methods because money is tight have to judge for themselves whether they can afford the purchase or not.”
BaFin therefore generally advises consumers to stay within their financial means and to take into account their account balance, monthly fixed costs, and other usual expenses. In addition, no one should be blinded by low installments, but should keep an eye on the total amount to be paid and also pay attention to possible interest and fees for “buy now, pay later” schemes.
The banking association also recommends remaining critical when additional products such as credit cards are offered as payment methods, and paying on time at the latest. This is because “default interest, reminder fees, and collection costs can be high.”
According to Schufa, a detailed analysis of current installment loans by age group shows that middle-aged people between 35 and 44 in particular have more and more current installment loans. There was also an increase among younger people between the ages of 18 and 34, but it was less pronounced. In the older age groups, on the other hand, the number of current installment loans was “largely stable or in some cases even slightly declining.”
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