04.11.2021
WHAT TO DO WITH LOANS IN THE FACE OF RISING INFLATION
There are many people who spend unreasonably on goods and services that are far from being essential. They live on the principle of "salary to salary" and do not see the point in saving to be more sustainable in a time of inflation and rising prices. And while it is true that money is losing some of its value, the phenomenon is temporary and now is the time to be more careful about our purchases." This was explained by Rayna Mitkova, chairwoman of the Receivables Management Association (RMA).
She advises consumers to always set aside a buffer amount sufficient to cover their costs for at least the next 3 months. However, in conditions of rising inflation, the funds set aside should be sufficient even for 6-9 months.
"In order to be confident that we will be able to meet our needs even in case of unplanned difficulties, it is important to have savings with which we can live for half a year. If we are not in good financial health, we need to realize what is really important and deprive ourselves of a trip or new appliances, for example. Instead, we could set aside for basic necessities, whose prices are currently rising sharply - electricity, heating and fuel, food, household goods, other basic services we use. "Failure to pay the loan installments can also only make them more expensive," Mitkova added.
According to RMA observations, in addition to teleworking, the cost of computers and peripherals has also increased. The changes related to the pandemic are also a reason for some consumers to invest in repairs and furniture, as well as in the renovation of household appliances.
The number of non-performing loans in Bulgaria since the beginning of the year remains similar compared to 2020 and even slightly decreases. The general levels of payment for consumers are also relatively stable, according to data from the association.
This, against the background of the unstable economic situation and negative forecasts, paints a seemingly optimistic picture. According to experts, however, it is only apparent.
"We are seeing an increased risk of people between the ages of 40 and 50, who are traditionally the most conscientious payers. These people have more sustainable incomes, often take care of both their children and elderly relatives, have the most responsible behavior and they are accepted as the backbone of the economy. However, it is with them that the first signals of difficulties in covering the monthly installments are felt," said Rayna Mitkova.
According to RMA data, changes in people between the ages of 40 and 50 do not affect overall pay levels, as at this stage the decline is offset by other age groups. But the phenomenon is indicative of what is happening in our country at the moment.
"It is not yet possible to identify clear reasons for the fluctuations in the most resilient group. Most of these consumers actually have the opportunity to cover their contributions, but forecasts of an increasingly complex economic situation and a difficult winter make them limit their costs. however, the budget should not exclude the coverage of loan installments. Failure to repay will have the exact opposite effect on financial stability," said Rayna Mitkova.
The pandemic stands out as a major factor in the reasons for non-payment given by consumers. Over 20% of all customers cite COVID and the economic consequences as a reason for delaying their contributions. Difficulties include reduced wages or redundancies due to pandemic conditions, limited access to a cash register or bank as a result of illness or quarantine.
In the big cities the payment is higher compared to the smaller settlements, the data of the RMA also show. Burgas, Stara Zagora and Blagoevgrad report improvement of this indicator on an annual basis. At the same time, in Ruse, Veliko Tarnovo and Vratsa there is a greater difficulty in repaying the installments compared to 2020. The Association expects that this trend will continue, as traditionally poorer regions are the first to suffer from negative changes in the macro environment.
"The long-term forecast of when the economy will take off is extremely difficult at the moment. However, the short-term forecast is clear - a difficult winter is coming and maintaining financial stability - from the general to that of each household, depends a lot on consumer behavior and discipline. Revision of budgets and proper allocation of funds will be key to our sustainability during the challenging period," Mitkova added.
