Consumer credit and small loan companies account for a minor share of consumer credit granted to households

At the end of June 2021, the stock of loans granted by other financial institutions (OFIs) to Finnish households amounted to EUR 4.6 billion, consisting almost entirely of consumer credit. The average interest rate on the loan stock was 5.1%. However, interest rates vary significantly across the different lenders. Entities providing mainly vehicle finance account for the majority (79%) of loans granted by OFIs to households. Other entities belonging to the OFI sector and granting household loans include for example consumer credit and small loan companies, banks’ finance companies and pawnshops.

Loan receivables of consumer credit and small loan companies have decreased

The stock of loans granted by consumer credit and small loan companies, also known as payday lenders, stood at EUR 220 million at the end of June 2021. The loan stock is estimated to have decreased significantly since 2019. A 20% interest rate cap[1] on consumer credit entered into force in September 2019. All loans granted by consumer credit and small loan companies were unsecured. In June 2021, they accounted for a minor share (1%) of the total stock of household consumer credit. At the same time, the average interest rate on loans granted to households by consumer credit and small loan companies was 46.6%[2]. A third of the loan stock consisted of revolving credit lines.

In the second quarter of 2021, households drew down other loans than vehicle loans[3] from other financial institutions[4] in the amount of EUR 80 million. The average interest rate on these new drawdowns was 9.0%. Slightly less than a quarter of the new drawdowns was made from consumer credit and small loan companies.

Majority of vehicle loans granted from outside the credit institution sector

Finnish households drew down a total of EUR 670 million of new vehicle loans from OFIs during the second quarter of 2021. Vehicle loans drawn down from credit institutions during the same period amounted to EUR 470 million; hence, the total amount of vehicle loans drawn down in the second quarter of 2021 was EUR 1.1 billion. The agreed annual interest rate on new vehicle loans drawn down from OFIs in June 2021 (2.6%) was lower than the interest rate on vehicle loans from credit institutions (3%). However, the annual percentage rate of charge[5], which also includes other expenses, on vehicle loans granted by credit institutions was lower (4.7%) compared to those granted by OFIs. At the end of June 2021, the total stock of vehicle loans granted by OFIs and credit institutions amounted to EUR 7 billion. OFIs accounted for a slightly higher share (54%) of the vehicle loan stock than credit institutions. Vehicle loans make up approximately 30% of households’ total consumer credit.

At the end of June 2021, the total stock of Finnish households’ consumer credit stood at EUR 23.6 billion. The total consumer credit stock is estimated not to have grown during the COVID-19 pandemic. Consumer credit granted by OFIs accounted for 19% of the total stock of household credit. The largest proportion (70%) of households’ consumer credit was granted by credit institutions operating in Finland.

For further information, please contact:

Markus Aaltonen, tel. +358 9 831 2395, email: markus.aaltonen(at)bof.fi,

Antti Hirvonen, tel. +358 9 183 2121, email: antti.hirvonen(at)bof.fi,

Jaakko Suni, tel. +358 10 831 2402, email: jaakko.suni (at)bof.fi

The next Other financial institutions release will be published at the beginning of 2022.

[1] Certain consumer credit is currently subject to a temporary interest rate cap (10%) until the end of September 2021.

[2] Consumer credit agreements concluded before September 2019 are governed by previous interest rate cap regulation, under which the effective interest rate on consumer credit under EUR 2,000 may not exceed the reference interest rate under the Interest Act by more than 50 percentage points. This interest rate cap excludes credit larger than EUR 2,000.

[3] Excl. revolving credit lines.

[4] Excl. pawnshops.

[5] In the OFI data collection, effective annual interest rate refers to new drawdowns, while in banking statistics, it refers to new agreements.