From a survey of the CosmoVisa secure purchase service, it follows that every third Russian who applied to a bank for a consumer or mortgage loan was refused in 2023. On what conditions will consumer loans be issued in 2024 – in the Izvestia article.
What is a consumer loan
In a broad sense, a consumer loan is any loan issued to private clients for consumer needs: purchasing equipment, furniture, paying for travel or weddings. In a broad sense, mortgages and car loans are also considered consumer loans, which are provided under special conditions: the money received can be spent only for the purpose specified in the loan agreement. A consumer loan is a loan to a private person without a down payment, collateral and compulsory insurance. By the end of 2023, Russians took out loans for a record total of 34.8 trillion rubles.
Throughout the first half of 2023, the lending market grew, but after a significant increase in the key rate by the Central Bank in August, November and December, demand cooled, Evgenia Bodnar, a lawyer and bankruptcy expert at the Financial-Legal Alliance company, told Izvestia.
“Since banks were accordingly forced to raise rates on their loan offers, most likely, in the coming months of the new year 2024, there will be a forced cooling of the heated lending market,” the expert clarified.
Consumer lending is available in almost every bank or financial institution. The exception is those that work only with corporate clients or credit cards. When choosing a bank to issue a consumer loan, it is important to evaluate the interest rate, term, maximum amount, type of loan and conditions for deferring or reducing payment.
Rules for issuing loans to individuals in 2024
The Bank of Russia has set stricter limits on the issuance of consumer loans for the first quarter of 2024. Representatives of the regulator linked the decision to the need to limit the debt burden of citizens. In the fall of 2023, the Central Bank already introduced limits on the issuance of new loans to borrowers with a debt burden ratio (DLI) of 80% or higher, which made it possible to significantly reduce the number of newly issued loans. In the fourth quarter of 2023, the limits were expanded to borrowers with a personal income tax of 50–80%, the Central Bank said in a statement.
It is noted that the conditions for lending to the population in the second quarter of 2024 will be discussed in February based on the dynamics of the population’s debt burden and lending standards.
Consumer loan: who will receive a refusal from January 1, 2024
In 2023, more than a third of Russians (36%) were refused when applying to a bank for a loan, and most often this happened when requesting a consumer loan. The vast majority of those who are not granted a loan do not know the reason for the refusal. At the same time, 52% noted that they were late in repaying loans, according to data from the CosmoVisa secure purchase service. The most popular reasons for refusal of lending were lack of income to service the loan and bad credit history, according to a company survey.
From January 1, 2024, new restrictions on lending to customers with medium and high debt loads will apply to banks. The most stringent conditions will affect the credit card segment. The permissible share of consumer loans that banks will be able to provide to clients with a high debt burden has been reduced from the current 30% to 25% of the quarterly volume of issues. The limit on issuing credit cards to the same group of borrowers will be reduced from 20% to 10% of issuances. Among the innovations is the provision of credit holidays for citizens who find themselves in difficult situations. If their income has dropped by 30% or more, they will be able to defer loan repayment for up to six months.
In addition, from 2024, banks undertake to notify individuals that they have a risk of failure to fulfill obligations to a credit institution and subsequent fines. The rule applies if the borrower’s debt burden is above 50%, and the money is borrowed from a bank or microfinance organization.
In most cases, the lending process consists of four stages. First of all, a citizen must fill out a loan application, indicating his personal data, information about income and employment, the amount and repayment period, and interest payments. At the stage of reviewing the borrower’s application, the bank verifies the accuracy of the information provided by the borrower and evaluates the borrower’s solvency and credit history.
If the decision to issue a loan is positive, a loan agreement is concluded between the borrower and the credit institution. It indicates the size, term of the loan, the procedure for its repayment, interest on the use of funds and other lending conditions. After completing the documents, the loan is issued in cash or transferred to the borrower’s account.